IBM 2010 Annual Report Download - page 83

Notes to Consolidated Financial Statements
International Business Machines Corporation and Subsidiary Companies 81
In April 2009, the FASB issued an amendment to the revised
business combination guidance regarding the accounting for assets
acquired and liabilities assumed in a business combination that
arise from contingencies. The requirements of this amended
guidance carry forward without significant revision the guidance
on contingencies which existed prior to January 1, 2009. Assets
acquired and liabilities assumed in a business combination that
arise from contingencies are recognized at fair value if fair value
can be reasonably estimated. If fair value cannot be reasonably
estimated, the asset or liability would generally be recognized in
accordance with the Accounting Standards Codification (ASC)
Topic 450 on contingencies. There was no impact upon adoption.
In April 2008, the FASB issued new requirements regarding the
determination of the useful lives of intangible assets. In developing
assumptions about renewal or extension options used to determine
the useful life of an intangible asset, an entity needs to consider its
own historical experience adjusted for entity-specific factors. In the
absence of that experience, an entity shall consider the assumptions
that market participants would use about renewal or extension
options. The new requirements applied to intangible assets acquired
after January 1, 2009. The adoption of these new rules did not have
a material impact in the Consolidated Financial Statements.
In November 2008, the FASB issued guidance on accounting
for defensive intangible assets. A defensive intangible asset is an
asset acquired in a business combination or in an asset acquisition
that an entity does not intend to actively use. According to the
guidance, defensive intangible assets are considered to be a
separate unit of account and valued based on their highest and
best use from the perspective of an external market participant.
The company adopted this guidance on January 1, 2009, and
there was no impact to the Consolidated Financial Statements
upon adoption.
Note C.
Acquisitions/Divestitures
Acquisitions
2010
In 2010, the company completed 17 acquisitions at an aggregate
cost of $6,538 million.
Netezza Corporation (Netezza)—On November 10, 2010, the
company completed the acquisition of 100 percent of Netezza, for
cash consideration of $1,847 million. Netezza will expand the com-
pany’s business analytics initiatives to help clients gain faster
insights into their business information, with increased performance
at a lower cost of ownership. Netezza was integrated into the
Software segment upon acquisition, and goodwill, as reflected in
the table on page 82, has been entirely assigned to the Software
segment. It is expected that none of the goodwill will be deductible
for tax purposes. The overall weighted average useful life of the
identified intangible assets acquired is 6.9 years.
Sterling Commerce—On August 27, 2010, the company completed
the acquisition of 100 percent of Sterling Commerce, a wholly
owned subsidiary of AT&T, Inc., for cash consideration of $1,415
million. Sterling Commerce will expand the company’s ability to
help clients accelerate their interactions with customers, partners
and suppliers through dynamic business networks using either
on-premise or cloud delivery models. Sterling Commerce was
integrated into the Software segment upon acquisition, and good-
will, as reflected in the table on page 82, has been entirely assigned
to the Software segment. It is expected that none of the goodwill
will be deductible for tax purposes. The overall weighted average
useful life of the identified intangible assets acquired, excluding
goodwill, is 6.9 years.
Other Acquisitions—The Software segment also completed
acquisitions of 10 privately held companies and one publicly held
company: in the first quarter, Lombardi Software, Inc. (Lombardi),
Intelliden Inc. and Initiate Systems, Inc.; in the second quarter, Cast
Iron Systems; in the third quarter, BigFix, Inc., Coremetrics and
Datacap; and in the fourth quarter, Unica Corporation (Unica), a
publicly held company, PSS Systems, OpenPages, Inc. (OpenPages)
and Clarity Systems. Global Technology Services (GTS) completed
an acquisition in the first quarter: the core operating assets of
Wilshire Credit Corporation (Wilshire). Global Business Services
(GBS) also completed an acquisition in the first quarter: National
Interest Security Company, LLC, a privately held company. Systems
and Technology (STG) completed acquisitions of two privately held
companies: in the third quarter, Storwize; and in the fourth quarter,
BLADE Network Technologies (BLADE). All acquisitions were for
100 percent of the acquired companies.