IBM 2008 Annual Report Download - page 96

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Notes to Consolidated Financial Statements
INTERNATIONAL BUSINESS MACHINES CORPORATION and Subsidiary Companies
Management Discussion ............................................................................................. 18
Consolidated Statements ............................................................................................ 60
Notes ............................................................................................................................... 66
A – E ........................................................................................................................66
F – J ........................................................................................................................86
K– Q .......................................................................................................................88
K. BORROWINGS .................................................................................................88
L. DERIVATIVES AND HEDGING TRANSACTIONS ..............................................90
M. OTHER LIABILITIES .........................................................................................94
N. STOCKHOLDERS’ EQUITY ACTIVITY ..............................................................95
O. CONTINGENCIES AND COMMITMENTS ..........................................................97
P. TAXES ...............................................................................................................99
Q. RESEARCH, DEVELOPMENT AND ENGINEERING ......................................... 101
R –W ..................................................................................................................... 102
    
At December , , in connection with its cash flow hedges of
anticipated royalties and cost transactions, the company recorded
net gains of $ million, net of tax, in accumulated gains and
(l osses)
not affecting retained earnings. Of this amount, $ million of
gains are expected to be reclassified to net income within the next
year, providing an offsetting economic impact against the underly-
ing anticipated transactions. At December , , net losses of
approximately $ million, net of tax, were recorded in accumulated
gains and
(l osses) not affecting retained earnings in connection with
cash flow hedges of the company’s borrowings. Of this amount,
$ million of gains are expected to be reclassified to net income
within the next year, providing an offsetting economic impact
against the underlying transactions.
The following table summarizes activity in the accumulated gains
and
(l osses) not affecting retained earnings section of the Consolidated
Statement of Stockholders’ Equity related to all derivatives classified
as cash flow hedges.
($  ,   ) (Credit)/Debit
December 31, 2005 $(238)
Net gains reclassified into earnings from
equity during 2006 205
Changes in fair value of derivatives in 2006 138
December 31, 2006 104
Net losses reclassified into earnings from
equity during 2007 (116)
Changes in fair value of derivatives in 2007 239
December 31, 2007 227
Net losses reclassified into earnings from
equity during 2008 (303)
Changes in fair value of derivatives in 2008 2
DECEMBER 31, 2008 $ (74)
For the years ending December , ,  and , there were
no significant gains or losses recognized in earnings representing
hedge ineffectiveness or excluded from the assessment of hedge effec-
tiveness (for fair value hedges and cash flow hedges), or associated
with an underlying exposure that did not or was not expected to
occur (for cash flow hedges); nor are there any anticipated in the
normal course of business.
Note M.
Other Liabilities
($  )
At December : 2008 2007
Income tax reserves $3,557 $2,107
Executive compensation accruals 860 1,058
Disability benefits 743 734
Derivative liabilities 702 534
Restructuring actions 476 631
Workforce reductions 415 476
Deferred taxes 270 1,064
Environmental accruals 246 231
Noncurrent warranty accruals 189 157
Asset retirement obligations 119 114
Other 735 864
TOTAL $8,311 $7,970
In response to changing business needs, the company periodically
takes workforce reduction actions to improve productivity, cost com-
petitiveness and to rebalance skills. The noncurrent contractually
obligated future payments associated with these activities are reflected
in the workforce reductions caption in the table above.
In addition, the company executed certain special actions as
follows: () the second quarter of  associated with Global Services
segments, primarily in Europe, () the second quarter of  asso-
ciated with the Microelectronics Division and rebalancing of both
the company’s workforce and leased space resources, () the fourth
quarter of  associated with the acquisition of the Pricewaterhouse-
Coopers consulting business, () the  actions associated with the
HDD business for reductions in workforce, manufacturing capacity
and space, () the actions taken in , and () the actions that were
executed prior to .
The table on page  provides a roll forward of the current and
noncurrent 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.