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Notes to Consolidated Financial Statements
INTERNATIONAL BUSINESS MACHINES CORPORATION AND SUBSIDIARY COMPANIES
basis (at least annually), to January 1, 2009. The application
of these amendments did not have a material impact on the
Consolidated Financial Statements.
In February 2007, the FASB issued guidance that permits
entities to measure eligible financial assets, financial liabilities
and firm commitments at fair value, on an instrument-by-instru-
ment basis, that are otherwise not permitted to be accounted
for at fair value under other generally accepted accounting prin-
ciples. The fair value measurement election is irrevocable and
subsequent changes in fair value must be recorded in earnings.
The company adopted this guidance as of January 1, 2008 but
has not applied the fair value option to any eligible assets or
liabilities. Thus, the adoption of this guidance did not affect the
Consolidated Financial Statements.
In the first quarter of 2007, the company adopted the guid-
ance on accounting for separately recognized servicing assets
and servicing liabilities. Separately recognized servicing assets
and servicing liabilities must be initially measured at fair value,
if practicable. Subsequent to initial recognition, the company
may use either the amortization method or the fair value mea-
surement method to account for servicing assets and servicing
liabilities within the scope of this Statement. The adoption of
this guidance did not have a material effect on the Consolidated
Financial Statements.
On January 1, 2007, the company adopted the guidance
on the accounting and reporting of uncertainties in income tax
law. The guidance prescribes a comprehensive model for the
financial statement recognition, measurement, presentation and
disclosure of uncertain tax positions taken or expected to be
taken in income tax returns. See note P, “Taxes”, on pages 101
to 103 for further information. The cumulative effect of adopting
this guidance was a decrease in tax reserves and an increase of
$117 million to the January 1, 2007 retained earnings balance.
Note C.
Acquisitions/Divestitures
Acquisitions
2009
In 2009, the company completed six acquisitions at an aggre-
gate cost of $1,471 million. The SPSS, Inc. acquisition is shown
separately given its significant purchase price.
SPSS, INC. (SPSS)—On October 2, 2009, the company acquired
100 percent of the outstanding common shares of SPSS for
cash consideration of $1,177 million. SPSS is a leading global
provider of predictive analytics software and solutions and this
acquisition will strengthen the company’s business analytics and
optimization capabilities. SPSS was integrated into the Software
segment upon acquisition, and goodwill, as reflected in the table
below, has been entirely assigned to the Software segment.
Substantially all of the goodwill is not deductible for tax pur-
poses. The overall weighted average useful life of the intangible
assets acquired, excluding goodwill, is 7.0 years.
OTHER ACQUISITIONS—The Software segment also completed
acquisitions of four privately held companies: in the second quar-
ter, Outblaze Limited, a messaging software provider, and Exeros,
Inc., a data discovery firm; in the third quarter, security provider
Ounce Labs, Inc.; and in the fourth quarter, Guardium, Inc., a
database security company. Global Technology Services com-
pleted one acquisition in the fourth quarter: RedPill Solutions PTE
Limited, a privately held company focused on business analytics.
Purchase price consideration for the “Other Acquisitions,” as
reflected in the table below, was paid all in cash. All acquisitions
are reported in the Consolidated Statement of Cash Flows net
of acquired cash and cash equivalents.
2009 ACQUISITIONS
($ in millions)
Amortization Other
Life (in Years) SPSS Acquisitions
Current assets $ 397 $ 13
Fixed assets/noncurrent 20 1
Intangible assets:
Goodwill N/A 748 255
Completed technology 4 to 7 105 39
Client relationships 5 to 7 30 20
In-process R&D N/A — —
Other identifiable assets 1 to 7 36 1
Total assets acquired 1,336 330
Current liabilities (157) (34)
Noncurrent liabilities (2) (0)
Total liabilities assumed (160) (35)
Total purchase price $1,177 $295
N/A—Not applicable
82