EMC 2002 Annual Report Download - page 31

Download and view the complete annual report

Please find page 31 of the 2002 EMC annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 118

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118

Table of Contents
recognizing, measuring and reporting of costs associated with exit and disposal activities, including restructuring activities. The pronouncement nullifies
Emerging Issues Task Force ("EITF") No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity."
Under EITF 94-3, a liability is recognized solely upon an entity's commitment to a plan. FAS No. 146 adjusts the timing of when a liability for termination
benefits is to be recognized based upon whether the employee is required to render future service. A liability for costs to terminate an operating lease or other
contract before the end of its term is to be recognized when the entity terminates the contract or ceases using the rights conveyed by the contract. All other
costs associated with an exit or disposal activity are to be expensed as incurred. FAS No. 146 requires the liability to be measured at its fair value with
subsequent changes in fair value to be recognized each reporting period utilizing an interest allocation approach. The pronouncement is effective for exit or
disposal activities initiated after December 31, 2002, with earlier application encouraged. We adopted FAS No. 146 effective January 1, 2003, and we do not
expect that the pronouncement will have a material impact on our financial position or results of operations.
In November 2002, the EITF reached a consensus on issue 00-21, "Revenue Arrangements with Multiple Deliverables." EITF 00-21 addresses revenue
recognition on arrangements encompassing multiple elements that are delivered at different points in time, defining criteria that must be met for elements to
be considered to be a separate unit of accounting. If an element is determined to be a separate unit of accounting, the revenue for the element is recognized at
the time of delivery. We do not expect that the pronouncement will have a material impact on our financial position or results of operations.
In November 2002, the FASB issued FASB Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others" (the "Interpretation"). This Interpretation elaborates on the disclosures to be made by a guarantor in its interim
and annual financial statements about its obligations under certain guarantees that it has issued. It also clarifies that a guarantor is required to recognize, at the
inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. We do not expect that this Interpretation will have a
material impact on our financial position or results of operations.
In December 2002, the FASB issued FAS No. 148, "Accounting for Stock-Based Compensation—Transition and Disclosure—an amendment of FASB
Statement No. 123." FAS No. 148 amends FAS No. 123, "Accounting for Stock-Based Compensation", to provide alternative methods of transition for a
voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, FAS No. 148 amends the disclosure
requirements of FAS No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based
employee compensation and the effect of the method used on reported results. As provided for in FAS No. 123, we have elected to apply Accounting
Principles Board ("APB") No. 25 "Accounting for Stock Issued to Employees" and related interpretations in accounting for our stock based compensation
plans. APB No. 25 does not require options to be expensed when granted with an exercise price equal to fair market value. We intend to continue to apply the
provisions of APB No. 25. See Note A to our Consolidated Financial Statements—"Summary of Significant Accounting Policies—Accounting for Stock-
Based Compensation."
In January 2003, the FASB issued FASB Interpretation No. 46, "Consolidation of Variable Interest Entities." In general, a variable interest entity is a
corporation, partnership, trust or any other legal structure used for business purposes that either (a) does not have equity investors with voting rights or (b) has
equity investors that do not provide sufficient financial resources for the entity to support its activities. A variable interest entity often holds financial assets,
including loans or receivables, real estate or other property. Variable interest entities have been commonly referred to as special-purpose entities or off-
balance sheet structures. This Interpretation requires a variable interest entity to be consolidated by a company if that company is subject to a majority of the
risk of loss from the variable interest entity's activities or entitled to receive a majority of the entity's residual returns or both. We do not expect that this
Interpretation will have a material impact on our financial position or results of operations.
28