IBM 2006 Annual Report Download - page 89

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INTERNATIONAL BUSINESS MACHINES CORPORATION AND SUBSIDIARY COMPANIES
87
M. OTHER LIABILITIES
(Dollars in millions)
AT DECEMBER 31: 2006 2005
Deferred income* $, $,
Deferred taxes  ,
Executive compensation accruals  ,
Restructuring actions  
Workforce reductions  
Disability benefits  
Derivatives liabilities  
Non-current warranty accruals  
Environmental accruals  
Other  
Total $, $,
* Deferred income amounts are primarily related to hardware and software long-
term maintenance agreements. Also see note A, “Significant Accounting Policies,”
on pages 62 to 71 for additional information.
In response to changing business needs, the company periodically
takes workforce reduction actions to improve productivity, cost com-
petitiveness and to rebalance skills. The non-current contractually
obligated future payments associated with these activities are reflected
in the Workforce reductions caption in the previous table.
In addition, the company executed certain special actions as follows:
(1) the second quarter of 2005 (discussed in note R, “2005 Actions,”
on pages 93 and 94), (2) the second quarter of 2002 associated with
the Microelectronics Division and rebalancing of both the company’s
workforce and leased space resources, (3) the fourth quarter of 2002
associated with the acquisition of the PricewaterhouseCoopers consult-
ing business, (4) the 2002 actions associated with the HDD business for
reductions in workforce, manufacturing capacity and space, ( 5) the
actions taken in 1999, and (6) the actions that took place prior to 1994.
The following table provides a roll forward of the current and non-
current liabilities associated with these special actions. 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)
LIABILITY LIABILITY
AS OF OTHER AS OF
DEC. 31, 2005 PAYMENTS ADJUSTMENTS* DEC. 31, 2006
Current:
Workforce $ $() $  $
Space  ()  
Other  — — 
Total Current $ $() $  $
Non-current:
Workforce $ $ — $  $
Space  — () 
Total Non-current $ $ — $ () $
* The Other Adjustments column in the table above principally includes the reclassification of non-current to current and foreign currency translation adjustments. In addition, during the
year ended December 31, 2006, net adjustments were recorded to decrease previously recorded liabilities for changes in the estimated cost of employee terminations and vacant space for
the 2002 actions ($25 million), the second-quarter 2005 actions ( $35 million), offset by increases for the actions taken prior to 1994 ( $13 million). Of the $47 million of net reductions
recorded during the year ended December 31, 2006, $18 million ( $7 million when offset by $11 million in accretion expense) was included in SG&A expense and $11 million ($7 million
when offset by $4 million in accretion expense) was recorded in Other (income) and expense.
The workforce accruals primarily relate to the company’s Global
Services business. The remaining liability relates to terminated employ-
ees who are no longer working for the company who were granted
annual payments 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, 2006
workforce accruals above is $46 million associated with the HDD
divestiture discussed in note A, “Significant Accounting Policies,” on
page 62. 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 HDD divestiture.
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 company’s maximum exposure for all environmen-
tal liabilities cannot be estimated and no amounts have been recorded
for non-ARO environmental liabilities that are not probable or estima-
ble. The total amounts accrued for non-ARO environmental liabilities,
including amounts classified as current in the Consolidated Statement
of Financial Position, that do not reflect actual or anticipated insurance
recoveries, were $252 million and $254 million at December 31, 2006
and 2005, respectively. 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, esti-
mates of future costs are subject to change due to protracted cleanup
periods and changing environmental remediation regulations.