Xerox 2002 Annual Report Download - page 49

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The following table presents the changes in the car-
rying amount of goodwill, by operating segment, for
the year ended December 31, 2002:
Production Office DMO Other Total
Balance at
January 1, 2002(1) $605 $710 $ 70 $121 $1,506
Foreign currency
translation
adjustment 82 55 (3) – 134
Impairment Charge – – (63) – (63)
Divestitures (4) – (1) – (5)
Other – (5) (3) – (8)
Balance at
December 31, 2002 $683 $760 $ – $121 $1,564
1 Balances include the amount of $61 related to acquired workforce intangi-
ble asset, that was classified to goodwill as of January 1, 2002.
Derivatives and Hedging: Effective January 1, 2001, we
adopted Statement of Financial Accounting Standards,
No. 133, “Accounting for Derivative Instruments and
Hedging Activities” (“SFAS No. 133”), which requires
companies to recognize all derivatives as assets or lia-
bilities measured at their fair value, regardless of the
purpose or intent of holding them. Gains or losses
resulting from changes in the fair value of derivatives
are recorded each period in current earnings or other
comprehensive income, depending on whether a deriv-
ative is designated as part of a hedge transaction and,
if it is, depending on the type of hedge transaction.
Changes in fair value for derivatives not designated as
hedging instruments and the ineffective portions of
hedges are recognized in earnings in the current peri-
od. The adoption of SFAS No. 133 resulted in a net
cumulative after-tax loss of $2 in the accompanying
Consolidated Statement of Income and a net cumula-
tive after-tax loss of $19 in Accumulated Other
Comprehensive Income which is included in the
accompanying Consolidated Balance Sheet. Further, as
a result of recognizing all derivatives at fair value,
including the differences between the carrying values
and fair values of related hedged assets, liabilities and
firm commitments, we recognized a $361 increase in
assets and a $382 increase in liabilities. Refer to Note
12 to the Consolidated Financial Statements for further
discussion.
Revenue Recognition: In the normal course of busi-
ness, we generate revenue through the sale and
rental of equipment, service, and supplies and income
associated with the financing of our equipment
sales. Revenue is recognized when earned. More
specifically, revenue related to sales of our products
and services is recognized as follows:
Equipment: Revenues from the sale of equipment,
including those from sales-type leases, are recognized
at the time of sale or at the inception of the lease, as
appropriate. For equipment sales that require us to
accounting principle, in the accompanying Consoli-
dated Statements of Income, as of January 1, 2002.
The following tables illustrate the pro forma impact
of the adoption of SFAS No. 142. Net Loss for the years
ended December 31, 2001 and 2000, as adjusted for the
exclusion of amortization expense, were as follows:
For the Year Ended December 31, 2001 2000
Reported Net Loss $(94) $(273)
Add: Amortization of goodwill, net of
income taxes 59 58
Adjusted Net Loss $(35) $(215)
Basic and Diluted Earnings per Share for the years
ended December 31, 2001 and 2000, as adjusted for the
exclusion of amortization expense, were as follows:
For the Year Ended December 31, 2001 2000
Reported Net Loss per Share
(Basic and Diluted) $(0.15) $(0.48)
Add: Amortization of goodwill,
net of income taxes 0.09 0.09
Adjusted Net Loss per Share
(Basic and Diluted) $(0.06) $(0.39)
Intangible assets totaled $360 and $457, net of
accumulated amortization of $98 and $62 as of
December 31, 2002 and 2001, respectively. All intangi-
ble assets relate to the Office operating segment and
were comprised of the following as of December 31,
2002:
Accu-
Amorti- Gross mulated
zation Carrying Amorti- Net
Period Amount(1) zation Amount
Installed customer
base 17.5 years $209 $ 33 $176
Distribution network 25 years 123 15 108
Existing technology 7 years 103 41 62
Trademarks 7 years 23 9 14
$458 $ 98 $360
1 Balances exclude the amount of $61 related to acquired workforce intangi-
ble asset, that was classified to goodwill as of January 1, 2002.
Amortization expense related to intangible assets
was $36, $40 and $55 for the years ended December
31, 2002, 2001 and 2000, respectively (including $4 of
amortization in 2001 on the acquired workforce prior
to reclassification). Amortization expense related to
these intangible assets is expected to remain approxi-
mately $36 annually through 2007.