IBM 2006 Annual Report Download - page 96

Charges incurred for the workforce reductions consisted of severance/
termination benefits for approximately 16,000 employees (14,500 of
which were for the incremental second-quarter 2005 actions). All
separations were substantially completed by March 31, 2006. The
non-current portion of the liability associated with the workforce
reductions relates to terminated employees who were granted annual
payments to supplement their income in certain countries. Depending
on individual country legal requirements, these required payments will
continue until the former employee begins receiving pension benefits
or is deceased. Cash payments made through December 31, 2006
associated with the workforce reductions were $1,277 million.
The vacant space accruals are primarily for ongoing obligations to
pay rent for vacant space, offset by estimated sublease income, over
the respective lease term of the company’s lease agreements. The
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INTERNATIONAL BUSINESS MACHINES CORPORATION AND SUBSIDIARY COMPANIES
94 2006 Annual Report
Total pre-tax restructuring activity was as follows:
(Dollars in millions)
PRE-TAX
CHARGES LIABILITY LIABILITY
RECORDED RECORDED IN AS OF
IN SECOND ASSET THE SECOND DEC. 31,
QTR. 2005 IMPAIRMENTS QTR. 2005 PAYMENTS OTHER** 2005
Workforce reductions $, $ — $, $(,) $() $
Vacant space  —  () () 
Asset impairments   — — — —
Total restructuring activity for
second-quarter 2005 actions $,* $ $, $(,) $() $+
* $1.6 billion recorded in SG&A expense and $0.2 billion recorded in Other (income) and expense in the Consolidated Statement of Earnings.
** Consists of foreign currency translation adjustments ($38 million), net balance sheet reclassifications ($41 million) and reversals of previously recorded liabilities ($34 million) for
changes in the estimated cost of employee terminations and vacant space, offset by approximately $1 million of accretion expense. The reversals were recorded primarily in SG&A expense.
+ $391 million recorded as a current liability in Accounts payable and accruals and $146 million as a non-current liability in Other liabilities in the Consolidated Statement of Financial Position.
(Dollars in millions)
LIABILITY LIABILITY
AS OF AS OF
DEC. 31, DEC. 31,
2005 PAYMENTS OTHER* 2006
Workforce reductions $ $() $ $ 
Vacant space  ()  
Total restructuring activity for second-quarter 2005 actions $ $() $ $**
* Consists of foreign currency translation adjustments ($37 million), net balance sheet reclassifications ($2 million), accretion expense ($7 million) and reversals of previous recorded
liabilities ($35 million) for changes in the estimated cost of employee terminations and vacant space. These reversals, net of accretion expense, were primarily recorded in SG&A.
** $92 million recorded as a current liability in Accounts payable and accruals and $155 million as a non-current liability in Other liabilities in the Consolidated Statement of Financial Position.
length of these obligations varies by lease with the longest extending
through 2016.
In connection with the company’s restructuring activities initiated in
the second quarter of 2005, the company recorded pre-tax impairment
charges for certain real estate assets of approximately $95 million during
the year ended December 31, 2005. The principal component of such
impairment charges resulted from the sale of a facility in Yasu-City,
Japan, which closed during the third quarter of 2005. In connection
with this sale, the company recorded an impairment charge to write
the asset down to its fair value in the second quarter.
These restructuring activities had the following effect on the
company’s reportable segments:
(Dollars in millions)
TOTAL PRE-TAX CUMULATIVE
CHARGES PRE-TAX CHARGES
EXPECTED RECORDED FOR
TO BE 2ND-QTR. 2005
AT DECEMBER 31: INCURRED INITIATIVES*
Global Technology Services $  $ 
Global Business Services  
Systems and Technology Group  
Software  
Global Financing  
Total reportable segments , ,
Unallocated corporate amounts  
Total $, $,
* Includes $35 million and $34 million for reversals of previously recorded charges for
the years ended December 31, 2006 and 2005, respectively, due to changes in the
estimated cost of employee terminations and vacant space. These adjustments were
predominantly recorded in SG&A expense in the Consolidated Statement of Earnings.
Consolidated Statements ......................................................... 
Notes .....................................................................................
A-G ......................................................................................... 
H-M ......................................................................................... 
N-S .......................................................................................... 
N. Stockholders’ Equity Activity .......................................... 
O. Contingencies and Commitments ................................... 
P. Taxes ................................................................................ 
Q. Research, Development and Engineering ...................... 
R. 2005 Actions .................................................................... 
S. Earnings Per Share of Common Stock ............................. 
T-X .......................................................................................... 
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