Reliant FORM 10-K manual Cost of revenues, Selling, general and administrative expense

		2002		2001
Other adjustments
Cost of revenues	$	64	$	88
Selling, general and administrative expense		115		233
Research and development expense		89		54
(Gain) loss on sale of businesses and assets		4		3
Other income (expense) — net		19		(22)
Interest expense		(19)		(2)
Income tax benefit (expense)		15		(401)
Minority interests — net of tax		26		(12)
Equity in net loss of associated companies — net of tax		1		–
Decrease (increase) to net loss	$	314	$	(59)

Cost of revenues

For the year ended December 31, 2002, the decrease to cost of revenues of $64 was comprised primarily of reductions of approximately $43 to inventory provisions and related accruals (such as accounts payable and contract manufacturer related accruals, including approximately $39 for a correction to the accounting for a spares inventory management program which should have been treated as warranty costs), approximately $19 decrease related to customer and contract related accruals and other accruals for such items as vacation and fringe benefits, partially offset by an increase of approximately $15 for warranty costs.

For the year ended December 31, 2001, the decrease to cost of revenues of $88 was comprised primarily of reductions of approximately $84 to contract and customer related accruals and approximately $72 for inventory provisions and related accruals (such as accounts payable and contract manufacturer related accruals, including approximately $16 for correction to the accounting for a spares inventory management program which should have been treated as warranty costs), partially offset by increases of approximately $53 for warranty costs and approximately $14 for a correction to the accounting for retention bonuses associated with an acquisition.

Selling, general and administrative expense

For the year ended December 31, 2002, the decrease of $115 to selling, general and administrative expense was comprised primarily of reductions of approximately $45 related to contract amendments and settlements with certain service providers, approximately $30 for salary and fringe benefit related accruals, approximately $29 from the reversal of rent expense associated with certain facilities for corrections to accounting for sale-leaseback transactions, approximately $13 related to the capitalization of certain software development costs under SOP 98-1, “Accounting for Software Development Costs”, and decreases to other accruals, partially offset by a net increase of $19 in bad debt expense.

For the year ended December 31, 2001, the decrease of $233 to selling, general and administrative expense was comprised primarily of reductions of approximately $88 from the reversal of bad debt expense related to revenue and receivables that had been reversed as part of the Second Restatement, approximately $52 from adjustments to customer and contractual accruals, approximately $41 for the reversal of items previously expensed related to reciprocal agreements with customers (the offset was a reduction to revenues primarily in prior periods), approximately $30 related to contract amendments and settlements with certain service providers and decreases to other accruals.

Research and development expense

For the year ended December 31, 2002, the decrease of $89 in research and development expense was primarily the result of a decrease of approximately $68 to correctly treat certain software repair costs as warranty costs, reductions to accruals related to various research and development projects and to other accruals for such items as vacation and fringe benefits.

For the year ended December 31, 2001, the decrease of $54 in research and development expense was primarily the result of a decrease of approximately $36 to correctly treat certain software repair costs as warranty costs, reductions to accruals related to various research and development projects and to other accruals for such items as vacation and fringe benefits.

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