IBM 2004 Annual Report Download - page 70

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
International Business Machines Corporation and Subsidiary Companies
68
ibm annual report 2004
In addition, the company executed certain actions prior to 1994, and in 1999 and
2002. The reconciliation of the December 31, 2003 to 2004 balances of the current and
non-current liabilities for restructuring actions is presented in the table below. 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 Balance at
Dec. 31, Other Dec. 31,
2003 Payments Adjustments*2004
Current:
Workforce $««««222 $«211 $««128 $«139
Space 129 111 68 86
Other 39 32 2 9
Total $««««390 $«354 $««198 $«234
Non-current:
Workforce $««««587 $«««— $«««(44) $«543
Space 282 — (38) 244
Other 2 — (2) —
Total $««««871 $«««— $«««(84) $«787
*The other adjustments column in the table above includes the reclassification of non-current to current and foreign
currency translation adjustments. In addition, during the year ended December 31, 2004, net adjustments to increase
previously recorded liabilities for changes in the estimated cost of employee terminations and vacant space for the
2002 actions ($42 million), offset by reductions in previously recorded liabilities for the HDD-related restructuring in
2002 ($1 million) and actions prior to 1999 ($28 million) were recorded. Of the $13 million of net adjustments
recorded during the year ended December 31, 2004 in the Consolidated Statement of Earnings, $14 million (net) was
predominantly included in Other (income) and expense offset by a $1 million credit included in Discontinued
Operations (for the HDD-related restructuring actions). Additionally, adjustments of $8 million were recorded to
Goodwill during the year ended December 31, 2004 for changes to estimated vacant space and workforce reserves.
The workforce accruals primarily relate to the company’s Global Services business. The
remaining liability relates to terminated employees who are no longer working for the
company, but who were granted annual payments to supplement their incomes in certain
countries. Depending on the individual country’s legal requirements, these required pay-
ments will continue until the former employee begins receiving pension benefits or dies.
Included in the December 31, 2004 workforce accruals above is $62 million associated
with the HDD-related restructuring discussed in note c, “Acquisitions/Divestitures,” on
pages 60 and 61.
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 73 through 76. In addition, there are $7 million of remaining liabilities at
December 31, 2004 associated with the HDD-related restructuring discussed in note c,
“Acquisitions/Divestitures,” on pages 60 and 61.
The company employs extensive internal environmental protection programs that
primarily are preventive in nature. The company also participates in environmental assess-
ments and cleanups at a number of locations, including operating facilities, previously
owned facilities and Superfund sites.
The cost of internal environmental protection programs that are preventative in nature
are expensed as incurred. When a cleanup program becomes likely, and it’s probable that
the company will incur cleanup costs and those costs can be reasonably estimated, the
company accrues remediation costs for known environmental liabilities. In addition, esti-
mated environmental costs that are associated with AROs (for example, the required removal
and restoration of chemical storage facilities and monitoring) are also accrued when it is
probable that the costs will be incurred and the costs are reasonably estimable. The
accounting for AROs is further discussed in note a, “Significant Accounting Policies,” and in
“Depreciation and Amortization” on page 52. Our maximum exposure for all environmen-
tal liabilities cannot be estimated and no amounts have been recorded for environmental
liabilities that are not probable or estimable.
Estimated environmental costs are not expected to materially affect the consolidated
financial position or consolidated results of the company’s operations in future periods.
However, estimates of future costs are subject to change due to protracted cleanup periods
and changing environmental remediation regulations.
The European Commission (EC) has issued a directive that requires member states of
the European Union (EU) to meet certain targets for collection, re-use and recovery of
waste electrical and electronic equipment. In February 2003, the EU published the Waste
Electrical and Electronic Equipment directive, or WEEE (Directive 2002/96/EC, which was
amended in December 2003 by Directive 2003/108/EC). The WEEE directive regulates the
collection, reuse and recycling of waste from many electrical and electronic products. The
WEEE directive must be implemented by August 13, 2005. Under the WEEE directive,
equipment producers are required to finance the collection, recovery and disposal of
electronic scrap. The company is continuing to evaluate the impact of adopting this guid-
ance. As most member states have yet to issue their implementation requirements, it is not
possible to determine the full amount of accruals necessary to comply with the directive.
Another directive, the Restrictions of Hazardous Substances (RoHS) directive (2002/95/EC)
bans the use of certain hazardous materials in electric and electrical equipment, which are
put on the market in member states of the EU after July 1, 2006. As most member states
have yet to issue their implementation requirements, the company is continuing the eval-
uate the full impact of adopting this guidance.
The total amounts accrued for environmental liabilities, including amounts classified
as current in the Consolidated Statement of Financial Position, that do not reflect actual or
anticipated insurance recoveries, were $246 million and $243 million at December 31,
2004 and 2003, respectively.