Computer Associates 2007 Annual Report Download - page 109

Severance: The Company currently estimates a reduction in workforce of approximately 2,000 individuals under the fiscal 2007
plan, including approximately 300 positions from the divestitures of consolidated majority owned subsidiaries considered
joint ventures during the fiscal year ended March 31, 2007. The termination benefits the Company has offered in connection
with this workforce reduction are substantially the same as the benefits the Company has provided historically for non-
performance-based workforce reductions, and in certain countries have been provided based upon prior experiences with the
restructuring plan announced in July 2005 (the fiscal 2006 plan) as described below. These costs have been recognized in
accordance with SFAS No. 112, “Employers Accounting for Post Employment Benefits, an Amendment of FASB Statements No. 5 and
43” (SFAS No. 112). Enhancements to termination benefits which exceed past practice, will be recognized as incurred in
accordance with SFAS No. 146 “Accounting for Costs Associated With Exit or Disposal Activities” (SFAS No. 146). The Company
incurred approximately $124 million of severance costs for the fiscal year ended March 31, 2007, relating to a total of
approximately 1,400 individuals. The Company anticipates total severance for the fiscal 2007 plan will cost approximately
$150 million, the remainder of which will be recognized in fiscal year 2008. The plans associated with the balance of the
reductions in workforce are still being finalized and the associated charges will be recorded once the actions are approved by
management.
Facilities Abandonment: The Company recorded the costs associated with lease termination or abandonment when the
Company ceased to utilize the leased property. Under SFAS No. 146, the liability associated with lease termination or
abandonment is measured as the present value of the total remaining lease costs and associated operating costs, less
probable sublease income. The Company accretes its obligations related to the facilities abandonment to the then-present
value and, accordingly, recognizes accretion expense as a restructuring expense in future periods. The Company incurred
approximately $23 million of charges related to abandoned properties during the fiscal year ending March 31, 2007 and
anticipates that the remaining amounts will be incurred by the end of fiscal year 2008. The Company anticipates the facility
portion of the fiscal 2007 plan will cost approximately $50 million.
Accrued restructuring costs and actual payments for fiscal year 2007 and the ending accrual balances at March 31, 2007
associated with the fiscal 2007 plan were as follows:
(IN MILLIONS) SEVERANCE
FACILITIES
ABANDONMENT
Additions $124 $23
Payments (37) (6)
Accrued Balance at March 31, 2007 $87 $17
The liability balance for the severance portion of the remaining reserve is included in the “Salaries, wages and commissions”
line on the Consolidated Balance Sheet. The liability for the facilities portion of the remaining reserve is included in the
“Accrued expenses and other current liabilities” line item on the Consolidated Balance Sheet. The costs are included in the
“Restructuring and other” line item on the Consolidated Statement of Operations for the fiscal year ended March 31, 2007.
Fiscal 2006 Plan: In July 2005, the Company announced the fiscal 2006 plan to increase efficiency and productivity and to
more closely align its investments with strategic growth opportunities. The Company accounted for the individual
components of the restructuring plan as follows:
Severance: The fiscal 2006 plan included a workforce reduction of approximately five percent, or 800 positions, worldwide.
The termination benefits the Company offered in connection with this workforce reduction were substantially the same as the
benefits the Company has provided historically for non-performance-based workforce reductions, and in certain countries
have been provided based upon statutory minimum requirements. The employee termination obligations incurred in
connection with the fiscal 2006 plan were accounted for in accordance with SFAS No. 112. In certain countries, the
Company elected to provide termination benefits in excess of legal requirements subsequent to the initial implementation of
the plan. These additional costs have been recognized as incurred in accordance with SFAS No. 146. The Company incurred
approximately $22 million and $36 million of severance costs for the fiscal years ended March 31, 2007 and March 31, 2006,
respectively.The Company has recognized substantially all of the severance related costs associated with the fiscal 2006 plan.
Final payment of these amounts is dependent upon settlement with the works councils in certain international locations.
97