Xerox 2006 Annual Report Download - page 57

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per-share data and unless otherwise indicated)
The following table summarizes certain significant charges that require management estimates:
Year ended December 31,
(in millions) 2006 2005 2004
Restructuring provisions and asset impairments ................................ $385 $366 $ 86
Amortization of intangible assets ............................................ 45 42 38
Provisions for receivables ................................................. 76 51 86
Provisions for obsolete and excess inventory ................................... 69 56 73
Provisions for litigation and regulatory matters ................................. 89 115 9
Depreciation and obsolescence of equipment on operating leases ................... 230 205 210
Depreciation of buildings and equipment ..................................... 277 280 305
Amortization of capitalized software ......................................... 84 114 134
Pension benefits – net periodic benefit cost .................................... 355 343 350
Other post-retirement benefits – net periodic benefit cost ......................... 117 117 111
Deferred tax asset valuation allowance provisions .............................. 12 (38) 12
Changes in Estimates: In the ordinary course of
accounting for items discussed above, we make changes
in estimates as appropriate, and as we become aware of
circumstances surrounding those estimates. Such changes
and refinements in estimation methodologies are reflected
in reported results of operations in the period in which the
changes are made and, if material, their effects are
disclosed in the Notes to the Consolidated Financial
Statements.
New Accounting Standards and Accounting Changes:
In September 2006, the FASB issued SFAS No. 158,
“Employers’ Accounting for Defined Benefit Pension and
Other Postretirement Plans, an amendment of FASB
Statements No. 87, 88, 106 and 132(R)” (“FAS 158”).
FAS 158 requires the recognition of an asset or liability
for the funded status of defined pension and other
postretirement benefit plans in the statement of financial
position of the sponsoring entity. The funded status of a
benefit plan is measured as the difference between plan
assets at fair value and the benefit obligation. For a
defined benefit pension plan, the benefit obligation is the
projected benefit obligation or PBO; for any other defined
benefit postretirement benefit plan, such as a retiree
health care plan, the benefit obligation is the accumulated
postretirement benefit obligation. The initial incremental
recognition of the funded status under FAS 158 of our
defined pension and other post retirement benefit plans,
as well as subsequent changes in our funded status that
are not included in net periodic benefit cost will be
reflected in shareholders’ equity and other comprehensive
loss, respectively. As of December 31, 2006, the net
unfunded status of our benefit plans was $2,842 and
recognition of this status upon the adoption of FAS 158
resulted in an after-tax charge to equity of $1,024. Prior to
the adoption of FAS 158, we recorded an after-tax credit
to our minimum pension liability of $(131), for a total
equity charge in 2006 related to the funded status of our
benefit plans of $893. Amounts recognized in
Accumulated other comprehensive loss are adjusted as
they are subsequently recognized as a component of net
periodic benefit cost. The method of calculating net
periodic benefit cost will not change from existing
guidance. FAS 158 also prescribes enhanced disclosures,
including current and long-term components of plan
assets and liabilities, as well as amounts recognized in
Accumulated other comprehensive loss that will
subsequently be recognized as a component of net
periodic benefit cost in the following year. Refer to Note
14 – Employee Benefit Plans for additional information.
The funded status recognition and certain disclosure
provisions of FAS 158 are effective as of our fiscal year
ending December 31, 2006. Retrospective application of
FAS 158 is not permitted. FAS 158 also requires the
consistent measurement of plan assets and benefit
obligations as of the date of our fiscal year-end statement
of financial position effective for the year ending
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