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Table of Contents
EMC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Combinations" and FAS No. 38, "Accounting for Preacquisition Contingencies of Purchased Enterprises." FAS No. 142 supercedes APB Opinion No. 17,
"Intangible Assets." These new statements require use of the purchase method of accounting for all business combinations initiated after June 30, 2001,
thereby eliminating use of the pooling-of-interests method. Goodwill is no longer amortized but tested for impairment under a two-step process. Under the
first step, an entity's net assets are broken down into reporting units and compared to their fair value. If the carrying amount of a reporting unit exceeds its fair
value, the second step of the goodwill impairment test is performed to measure the amount of impairment loss, if any. The second step compares the implied
fair value of a reporting unit's goodwill with the carrying amount of that goodwill. If the carrying amount of a reporting unit's goodwill exceeds the implied
fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess. In addition, within six months of adopting the accounting
standard, a transitional impairment test must be completed, and any impairments identified must be treated as a cumulative effect of a change in accounting
principle. Additionally, new criteria have been established that determine whether an acquired intangible asset should be recognized separately from goodwill.
The statements were effective for business combinations initiated after June 30, 2001, with the entire provisions of FAS No. 142 becoming effective for EMC
commencing with its 2002 fiscal year. EMC has completed its transitional impairment test and concluded that there is no impairment to goodwill. As a result
of adopting FAS No. 142, approximately $42.0 million of goodwill amortization, net of income tax benefits of $4.2 million, was not recognized in 2002.
The following is a reconciliation of reported net loss to adjusted net loss and reported loss per share to adjusted loss per share had FAS No. 142 been in
effect for 2001 and 2000 (table in thousands, except per share amounts):
For the Year Ended December 31,
2001 2000
Net income (loss) $ (507,712) $ 1,782,075
Add back: Impact of goodwill amortization, net of tax benefit of $4,468 and $400 47,921 39,643
Adjusted net income (loss) $ (459,791) $ 1,821,718
Net income (loss) per share, basic $ (0.23) $ 0.82
Add back: Impact of goodwill amortization, net of taxes 0.02 0.02
Adjusted net income (loss) per share, basic $ (0.21) $ 0.84
Net income (loss) per share, diluted $ (0.23) $ 0.79
Add back: Impact of goodwill amortization, net of taxes 0.02 0.02
Adjusted net income (loss) per share, diluted $ (0.21) $ 0.81
53