IBM 2003 Annual Report Download - page 109

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Notes to Consolidated Financial Statements
INTERNATIONAL BUSINESS MACHINES CORPORATION AND SUBSIDIARY COMPANIES
*Recorded in Accounts payable and accruals in the Consolidated Statement of
Financial Position.
** Recorded in Other liabilities in the Consolidated Statement of Financial Position.
+Principally represents currency translation adjustments.
++Principally represents currency translation adjustments and reclassifications between
current and non-current. In addition, net adjustments of $(6) million were recorded
in SG&A expense in 2003 to reduce previously recorded liabilities. These adjustments
were for changes in the estimated cost of employee terminations. There were also net
adjustments in 2003 to reduce goodwill and previously recorded liabilities of $36 million
for changes in the estimated cost of employee terminations and vacant space relating to
people and space acquired from PwC.
(a) The majority of the workforce reductions relate to the
company’s Global Services business. The workforce
reductions represent 3,541 people all of whom left the
company as of December 31, 2003. The non-current work-
force accrual relates to terminated employees in certain
countries outside the U.S., for whom the company is
required to make annual payments to supplement their
incomes. Depending on individual country legal require-
ments, these required payments will continue until the
former employee begins receiving pension benefits or dies.
These charges ($305 million in the table above) were
included in SG&A expense. The workplace reductions
also affected 1,203 acquired PwCC employees all of whom
left the company as of December 31, 2003 ($48 million in
the table above). These costs were included as part of the
liabilities assumed for purchase accounting in 2002.
(b) The majority of the space accruals are for ongoing obliga-
tions to pay rent for vacant space of PwCC that could not
be sublet or space that was sublet at rates lower than the
committed lease arrangements. The length of these
obligations varies by lease with the longest extending
through 2012. The charges related to IBM space ($17 million)
were included in Other (income) and expense in 2002.
The costs related to acquired PwCC space are included
as part of the liabilities assumed for purchase accounting
in 2002 ($235 million in the first table above comprise
$62 million current and $173 million non-current).
FOURTH QUARTER ACTIONS
During the fourth quarter of 2002, the company executed several actions related to the company’s acquisition of PwCC.
Specifically, the company rebalanced both its workforce and its leased space resources. The following table summarizes the
significant components of these actions.
(dollars in millions)
RECORDED IN
PURCHASE
RECORDED IN THE CONSOLIDATED ACCOUNTING
STATEMENT OF EARNINGS (SEE NOTE C)
TOTAL
TOTAL SALE OR LIABILITY LIABILITY LIABILITY LIABILITY
PRE-TAX WRITE-OFF RECORDED RECORDED RECORDED OTHER AS OF
CHARGES OF ASSETS IN 4TH QTR. IN 4TH QTR. IN 4TH QTR. PAYMENTS ADJUSTMENTS+DEC. 31, 2002
Workforce: $«305 (a) $«—
Current*$«248 $«««48 (a) $«296 $«16 $«(2) $«278
Non-current** 57 (a) —57——57
Vacant space: 17 (b) 4
Current*662
(b) 68 1 — 67
Non-current** 7173 (b) 180 — — 180
Total $«322 $«««4 $«318 $«283 $«601 $«17 $«(2) $«582
(dollars in millions)
TOTAL
LIABILITY LIABILITY
AS OF AS OF
DEC. 31, OTHER DEC. 31,
2002 PAYMENTS ADJUSTMENTS++ 2003
Workforce:
Current*$«278 $«246 $«««6 $«««38
Non-current** 57 — 22 79
Vacant space:
Current*67 64 37 40
Non-current** 180 — (47) 133
Total $«582 $«310 $«18 $«290