IBM 2003 Annual Report Download - page 101

(dollars in millions, net of tax) DEBIT/(CREDIT)
Cumulative effect of adoption of
SFAS No. 133 as of January 1, 2001 $«(219)
Net gains reclassified into earnings
from equity during 2001 379
Changes in fair value of derivatives in 2001 (456)
December 31, 2001 (296)
Net losses reclassified into earnings from
equity during 2002 (5)
Changes in fair value of derivatives in 2002 664
December 31, 2002 363
Net losses reclassified into earnings
from equity during 2003 (713)
Changes in fair value of derivatives in 2003 804
December 31, 2003 $««454
At December 31, 2003, there were no significant gains or
losses on derivative transactions or portions thereof that were
either ineffective as hedges, excluded from the assessment
of hedge effectiveness, or associated with an underlying
exposure that did not occur; nor are there any anticipated in
the normal course of business.
M
other liabilities
(dollars in millions)
AT DECEMBER 31: 2003 2002*
Deferred taxes $«1,834 $«1,450
Deferred income 1,842 1,409
Executive compensation accruals 1,036 851
Restructuring actions 871 1,024
Postemployment/preretirement liability 579 572
Disability benefits 349 304
Environmental accruals 214 208
Other 731 463
Total $«7,456 $«6,281
*Reclassified to conform with 2003 presentation.
Each year the company takes certain workforce rebalancing
actions to improve productivity and competitive position. The
non-current contractually obligated future payments associ-
ated with these ongoing activities are reflected in the Post-
employment/preretirement liability caption in the table above.
In addition, the company executed certain actions prior
to 1994, and in 1999 and 2002. The non-current liabilities
associated with these actions are reflected in restructuring
actions in the following table. The reconciliation of the
December 31, 2002 to 2003 balances of the current and non-
current liabilities for restructuring actions are presented in the
tables on pages 105 and 107. The current liabilities presented in
the table are included in Other accrued expenses and liabilities
in the Consolidated Statement of Financial Position.
(dollars in millions)
BALANCE AT OTHER BALANCE AT
JAN. 1, ADJUST- DEC. 31,
2003 PAYMENTS MENTS*2003
Current:
Workforce $««««647 $«537 $««112 $«222
Space 181 229 177 129
Other 115 90 14 39
Total $««««943 $«856 $««303 $«390
Non-current:
Workforce $««««574 $«««— $««««13 $«587
Space 419 — (137) 282
Other 31 — (29) 2
Total $«1,024 $«««— $«(153) $«871
*The other adjustments column in the table above includes the reclassification of non-
current to current and foreign currency translation adjustments. In addition, net adjust-
ments of approximately $106 million were made during the year ended December 31,
2003 to reduce previously recorded liabilities. These adjustments were for differences
between the estimated and actual proceeds on the disposition of certain assets and
changes in the estimated cost of employee terminations and vacant space for the 2002
actions ($28 million), net adjustments for fourth quarter 2002 actions recorded in pur-
chase accounting ($36 million), HDD-related restructuring in 2002 ($20 million) and
actions prior to 1999 ($22 million). Of the $106 million of net adjustments, $36 million
was recorded as adjustments to Goodwill, $20 million was included in Discontinued
Operations (for the HDD related restructuring actions), with the remainder predomi-
nantly included in SG&A in the Consolidated Statement of Earnings.
The workforce accruals primarily relate to the company’s
Global Services business. The non-current portion of the
liability relates to terminated employees who are no longer
working for the company, but who were granted annual pay-
ments to supplement their incomes in certain countries.
Depending on the individual country’s legal requirements,
these required payments will continue until the former
employee begins receiving pension benefits or dies. Included
in the December 31, 2003 workforce accruals above is $133 mil-
lion associated with the HDD related restructuring discussed
in note C, “Acquisitions/Divestitures,” on pages 89 to 92.
The space accruals are for ongoing obligations to pay rent
for vacant space that could not be sublet or space that was
sublet at rates lower than the committed lease arrangement.
The length of these obligations varies by lease with the
longest extending through 2016.
Other accruals are primarily the remaining liabilities
(other than workforce or space) associated with the 2002
second quarter actions described in note S, “2002 Actions,”
on pages 105 through 107. In addition, there are $7 million of
remaining liabilities at December 31, 2003 associated with
the HDD-related restructuring discussed in note C,
“A cquisitions/Divestitures,” on pages 89 to 92.
The company employs extensive internal environmental
protection programs that primarily are preventive in nature.
The company also participates in environmental assessments
and cleanups at a number of locations, including operating
facilities, previously owned facilities and Superfund sites.
The total amounts accrued for environmental liabilities,
including amounts classified as current in the Consolidated
Statement of Financial Position, that do not reflect actual
Notes to Consolidated Financial Statements
INTERNATIONAL BUSINESS MACHINES CORPORATION AND SUBSIDIARY COMPANIES
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