IBM 2013 Annual Report Download - page 96

Notes to Consolidated Financial Statements
International Business Machines Corporation and Subsidiary Companies
95
In September 2011, the FASB issued amended guidance that
simplified how entities test goodwill for impairment. After an assess-
ment of certain qualitative factors, if it is determined to be more likely
than not that the fair value of a reporting unit is less than its carrying
amount, entities must perform the quantitative analysis of the good-
will impairment test. Otherwise, the quantitative test(s) is optional. The
guidance was effective January 1, 2012 with early adoption permitted.
The company adopted this guidance for the 2011 goodwill impair-
ment test. There was no impact in the consolidated financial results.
In June 2011, the FASB issued amended disclosure requirements
for the presentation of OCI and AOCI. OCI is comprised of costs,
expenses, gains and losses that are included in comprehensive
income but excluded from net income, and AOCI comprises the
aggregated balances of OCI in equity. The amended guidance elimi-
nated the option to present period changes in OCI as part of the
Statement of Changes in Equity. Under the amended guidance, all
period changes in OCI are to be presented either in a single continu-
ous statement of comprehensive income, or in two separate, but
consecutive financial statements. Only summary totals are to be
included in the AOCI section of the Statement of Changes in Equity.
These changes were effective January 1, 2012 with early adoption
permitted. The company adopted the two statement approach
effective with its full-year 2011 financial statements. There was no
impact in the consolidated financial results as the amendments
related only to changes in financial statement presentation.
In April 2011, the FASB issued new and clarifying guidance and
to help creditors in determining whether a creditor has granted a
concession, and whether a debtor is experiencing financial difficul-
ties for purposes of determining whether a restructuring constitutes
a troubled debt restructuring. The new guidance became effective
July 1, 2011 applied retrospectively to January 1, 2011. Prospective
application was required for any new impairments identified as a
result of this guidance. These changes did not have a material
impact in the consolidated financial results.
In December 2010, the FASB issued amended guidance to
clarify the acquisition date that should be used for reporting pro-
forma financial information for business combinations. If comparative
financial statements are presented, the pro-forma revenue and earn -
ings of the combined entity for the comparable prior reporting
period should be reported as though the acquisition date for all
business combinations that occurred during the current year had
been completed as of the beginning of the comparable prior annual
reporting period. The amendments in this guidance were effective
on a prospective basis for business combinations for which the
acquisition date was on or after January 1, 2011. There was no
impact in the consolidated financial results as the amendments
related only to additional disclosures.
In December 2010, the FASB issued amendments to the guid-
ance on goodwill impairment testing. The amendments modified
step 1 of the goodwill impairment test for reporting units with zero
or negative carrying amounts. For those reporting units, an entity is
required to perform step 2 of the goodwill impairment test if it is more
likely than not that a goodwill impairment exists. In making that
determination, an entity should consider whether there are any
adverse qualitative factors indicating that impairment may exist. The
amendments were effective January 1, 2011 and did not have an
impact in the consolidated financial results.
NOTE C.
ACQUISITIONS/DIVESTITURES
Acquisitions
Purchase price consideration for all acquisitions, as reflected
in the tables in this note, is paid primarily in cash. All acquisitions
are reported in the Consolidated Statement of Cash Flows net of
acquired cash and cash equivalents.
2013
In 2013, the company completed 10 acquisitions at an aggregate
cost of $3,219 million.
SoftLayer Technologies, Inc. (SoftLayer)—On July 3, 2013, the
company completed the acquisition of 100 percent of the privately
held company, SoftLayer, a cloud computing infrastructure provider
based in Dallas, Texas for cash consideration of $1,977 million. Soft-
Layer joins the company’s new cloud services division, which
combines SoftLayer with IBM SmartCloud into a global platform.
The new division provides a broad range of choices to the company’s
clients, ISVs and channel and technology partners. Goodwill of
$1,285 million has been assigned to the Global Technology Services
($1,246 million) and Software ($39 million) segments. 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 7.0 years.
Other Acquisitions— The Software segment completed acquisitions
of eight privately held companies: in the first quarter, StoredIQ Inc.
(StoredIQ) and Star Analytics, Inc. (Star Analytics); in the second
quarter, UrbanCode Inc. (UrbanCode); and in the third quarter, Trust-
eer, Ltd. (Trusteer) and Daeja Image Systems, Ltd. (Daeja); and in the
fourth quarter, Xtify, Inc. (Xtify), The Now Factory and Fiberlink Com-
munications (Fiberlink). Systems and Technology (STG) completed
one acquisition: in the third quarter, CSL International (CSL), a
privately held company. All acquisitions were for 100 percent of
the acquired companies.