IBM 2003 Annual Report Download - page 90

Download and view the complete annual report

Please find page 90 of the 2003 IBM annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 128

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128

Impairment of Long-Lived Assets and for Long-Lived Assets
to Be Disposed Of,” and develops a single accounting model,
based on the framework established in SFAS No. 121 for
long-lived assets to be disposed of by sale, whether such
assets are or are not deemed to be a business. SFAS No. 144
also modifies the accounting and disclosure rules for discon-
tinued operations. The standard was adopted on January 1,
2002, and did not have a material impact on the company’s
Consolidated Financial Statements. The discontinued HDD
operations are presented in the Consolidated Financial
Statements in accordance with SFAS No. 144.
In November 2001, the FASB issued EITF Issue No. 01-14,
“Income Statement Characterization of Reimbursements
Received for ‘Out of Pocket’ Expenses Incurred.” This
guidance requires companies to recognize the recovery of
reimbursable expenses such as travel costs on services con-
tracts as revenue. These costs are not to be netted as a
reduction of cost. This guidance was effective January 1,
2002. This guidance did not have a material effect on the
company’s Consolidated Financial Statements due to the
company’s billing practices. For instance, outside the U. S.,
almost all of the company’s contracts involve fixed billings
that are designed to recover all costs, including out-of-
pocket costs. Therefore, the “reimbursement” of these costs
is already recorded in revenue.
In July 2001, the FASB issued SFAS No. 141, “Business
Combinations,” and SFAS No. 142, “Goodwill and Other
Intangible Assets.” SFAS No. 141 requires the use of the pur-
chase method of accounting for business combinations and
prohibits the use of the pooling of interests method. Under
the previous rules, the company used the purchase method
of accounting. SFAS No. 141 also refines the definition of
intangible assets acquired in a purchase business combina-
tion. As a result, the purchase price allocation of current
business combinations may be different than the allocation
that would have resulted under the old rules. Business combi-
nations must be accounted for using SFAS No. 141 effective
July 1, 2001.
SFAS No. 142 eliminates the amortization of goodwill,
requires annual impairment testing of goodwill and intro-
duces the concept of indefinite life intangible assets. The
company adopted SFAS No. 142 on January 1, 2002. The new
rules also prohibit the amortization of goodwill associated
with business combinations that closed after June 30, 2001.
In accordance with SFAS No. 141, the unamortized bal-
ance for acquired assembled workforce of $33 million, which
had been recognized as an intangible asset separate from
goodwill, has been reclassified to goodwill effective January 1,
2002. In addition, an initial goodwill impairment test was
required to be performed in 2002 as of January 1, 2002. This
initial test and the company’s first annual goodwill impairment
test, performed as of October 1, 2002, resulted in no goodwill
impairment charges. See note I, “Intangible Assets Including
Goodwill,” on page 94 for current year changes in the
amount of recorded goodwill.
The following table presents Reported income from
continuing operations and net income adjusted to exclude
goodwill amortization, which is no longer recorded under
SFAS No. 142 effective January 1, 2002.
(dollars in millions except per share amounts)
FOR THE YEAR ENDED DECEMBER 31: 2003 2002 2001
Reported income from
continuing operations $«7,613 $«5,334 $«8,146
Add: Goodwill amortization,
net of tax effects ——262
Adjusted income from
continuing operations $«7,613 $«5,334 $«8,408
Basic earnings per share from
continuing operations:
Reported income from
continuing operations $«««4.42 $«««3.13 $«««4.69
Goodwill amortization ——0.15
Adjusted basic earnings
per share from
continuing operations $«««4.42 $«««3.13 $«««4.85*
Diluted earnings per share
from continuing operations:
Reported income from
continuing operations $«««4.34 $«««3.07 $«««4.59
Goodwill amortization ——0.15
Adjusted diluted earnings
per share from
continuing operations $«««4.34 $«««3.07 $«««4.74
Reported net income $«7,583 $«3,579 $«7,723
Add: Goodwill amortization,
net of tax effects ——262
Adjusted net income $«7,583 $«3,579 $«7,985
Basic earnings per share:
Reported net income $«««4.40 $«««2.10 $«««4.45
Goodwill amortization ——0.15
Adjusted basic earnings
per share $«««4.40 $«««2.10 $«««4.60
Diluted earnings per share:
Reported net income $«««4.32 $«««2.06 $«««4.35
Goodwill amortization ——0.15
Adjusted diluted earnings
per share $«««4.32 $«««2.06 $«««4.50
*Does not total due to rounding.
Notes to Consolidated Financial Statements
INTERNATIONAL BUSINESS MACHINES CORPORATION AND SUBSIDIARY COMPANIES
88