IBM 2007 Annual Report Download - page 78

76
Notes to Consolidated Financial Statements
International Business Machines Corporation and Subsidiary Companies
Management Discussion ..................................14
Consolidated Statements ..................................58
Notes ........................................................... 64
A-F ............................................................. 64
A. Significant Accounting Policies ..................64
B. Accounting Changes ............................. 73
C. Acquisitions/Divestitures ...................... 76
D. Financial Instruments
(excluding derivatives).................................82
E. Inventories ...................................................83
F. Financing Receivables .................................83
G-M ..................................................................84
N-S ...................................................................94
T-W ................................................................102
As of December 31, 2005, the company was unable to estimate the
range of settlement dates and the related probabilities for certain
asbestos remediation AROs. These conditional AROs are primarily
related to the encapsulated structural fireproofing that is not subject to
abatement unless the buildings are demolished and non-encapsulated
asbestos that the company would remediate only if it performed major
renovations of certain existing buildings. Because these conditional
obligations have indeterminate settlement dates, the company could
not develop a reasonable estimate of their fair values. The company
will continue to assess its ability to estimate fair values at each future
reporting date. The related liability will be recognized once sufficient
additional information becomes available.
In June 2005, the FASB issued FSP No. FAS 143-1, “Accounting
for Electronic Equipment Waste Obligations,” (FSP FAS 143-1) that
provides guidance on how commercial users and producers of elec-
tronic equipment should recognize and measure asset retirement
obligations associated with the European Directive 2002/96/EC on
Waste Electrical and Electronic Equipment (the “Directive”). In
2005, the company adopted FSP FAS 143-1 in those European Union
(EU) member countries that transposed the Directive into country-
specific laws. Its adoption did not have a material effect on the
Consolidated Financial Statements. The effect of applying FSP FAS
143-1 in the remaining countries in future periods is not expected to
have a material effect on the Consolidated Financial Statements.
In the third quarter of 2005, the company adopted SFAS No. 153,
“Exchanges of Nonmonetary Assets, an amendment of APB Opinion
No. 29.” SFAS No. 153 requires that exchanges of productive assets be
accounted for at fair value unless fair value cannot be reasonably deter-
mined or the transaction lacks commercial substance. The adoption
of SFAS No. 153 did not have a material effect on the Consolidated
Financial Statements.
Note C. Acquisitions/Divestitures
Acquisitions
2007
In 2007, the company completed 12 acquisitions at an aggregate cost
of $1,144 million.
The Software segment completed six acquisitions: in the first
quarter, Consul Risk Management International BV and Vallent Cor-
por ation, both privately held companies. Four acquisitions were
completed in the third quarter: Watchfire Corporation, WebDialogs
Inc. and Princeton Softech Inc., all privately held companies, and
DataMirror Corporation, a publicly held company. Each acquisition
further complemented and enhanced the software product portfolio.
Global Technology Services completed four acquisitions: in the
first quarter, Softek Storage Solutions Corporation (Softek) and DM
Information Systems, Ltd. (DMIS), both privately held companies.
Two acquisitions were completed in the fourth quarter: Novus
Consulting Group, Inc. and Serbian Business Systems, both privately
held companies. Softek augments the company’s unified data mobility
offerings and worldwide delivery expertise for managing data in stor-
age array, host and virtualized IT environments. DMIS will enhance
and complement the Technology Service offerings. Novus CG, a
storage solution company, will provide improved access to business
information, enable stronger regulatory and corporate compliance
and improve overall information technology performance. Serbian
Business Systems establishes the company’s maintenance and techni-
cal support services business in Serbia.
Global Business Services completed one acquisition in the fourth
quarter: IT Gruppen AS, which will add to the company’s presence
in the retail and media sectors.
Systems and Technology completed one acquisition in the fourth
quarter: XIV, Ltd., a privately held company focused on storage
systems technology.
Purchase price consideration was paid in cash. These acquisitions
are reported in the Consolidated Statement of Cash Flows net of
acquired cash and cash equivalents.
The table on page 77 reflects the purchase price related to these
acquisitions and the resulting purchase price allocations as of
December 31, 2007.
During the fourth quarter of 2007, the company entered into a
definitive agreement to acquire Cognos, Inc. The acquisition of
Cognos, Inc., a publicly held company, was completed in January
2008. The acquisition of Cognos, Inc. supports the Information on
Demand strategy and will provide the company with a strong entry
in the Business Intelligence market.
The closing of the Telelogic AB acquisition, announced in the
second quarter of 2007, is conditioned upon satisfactory completion
of regulatory reviews in the European Union. Regulatory reviews in
the U.S. have been completed.