IBM 2004 Annual Report Download - page 78

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
International Business Machines Corporation and Subsidiary Companies
76
ibm annual report 2004
*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 and reclassifications between current and non-current. In
addition, net adjustments of $28 million were recorded predominantly in Other (income) and expense in 2004 and
$(6) million recorded in SG&A expense in 2003 to adjust previously recorded liabilities. These adjustments were for
changes in the estimated cost of employee terminations and vacant space. There were also net adjustments of $8 mil-
lion and $36 million in 2004 and 2003, respectively, to reduce goodwill and previously recorded liabilities for changes
in the estimated cost of employee terminations and vacant space relating to people and space acquired from PwCC.
(a) The majority of the workforce reductions relate to the company’s Global Services busi-
ness. The workforce reductions represent 3,541 people, all of whom left the company
as of December 31, 2003. The remaining liability relates to terminated employees in
certain countries outside the United States, for whom the company is required to make
annual payments to supplement their incomes. Depending on individual country legal
requirements, 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 obligations 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 vary 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 mil-
lion in the 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 Accounting
Consolidated Statement of Earnings (see Note C)
Total Liability
Total Sale or Liability Liability Liability as of
Pre-tax Write-off Recorded Recorded Recorded Other Dec. 31,
Charges of Assets in 4th Qtr. in 4th Qtr. in 4th Qtr. Payments Adjustments+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) $«582
(Dollars in millions)
Total Liability Liability Liability
as of as of as of
Dec. 31, Other Dec, 31, Other Dec. 31,
2002 Payments Adjustments+2003 Payments Adjustments+2004
Workforce:
Current*$«278 $«246 $«««6 $«««38 $«29 $«21 $«««30
Non-current** 57 — 22 79 — (13) 66
Vacant space:
Current*67 64 37 40 49 45 36
Non-current** 180 — (47) 133 — (14) 119
Total $«582 $«310 $«18 $«290 $«78 $«39 $«251