Reliant FORM 10-K manual Accumulated other comprehensive loss

F-68

18. Accumulated other comprehensive loss

The components of accumulated other comprehensive loss, net of tax, were as follows:

		2003		2002		2001
Accumulated foreign currency translation adjustment
Balance at the beginning of the year	$	(331)	$	(488)	$	(354)
Change in foreign currency translation adjustment(a)		529		157		(134)
Balance at the end of the year		198		(331)		(488)
Unrealized gain (loss) on investments — net
Balance at the beginning of the year		24		5		44
Change in unrealized gain (loss) on investments		57		19		(39)
Balance at the end of the year(b)		81		24		5
Unrealized derivative gain (loss) on cash flow hedges — net
Balance at the beginning of the year		(3)		(14)		–
Change in unrealized derivative gain (loss) on cash flow hedges(c)		15		11		(14)
Balance at the end of the year		12		(3)		(14)
Minimum pension liability(d)
Balance at the beginning of the year		(641)		(84)		–
Change in minimum pension liability		(188)		(557)		(84)
Balance at the end of the year		(829)		(641)		(84)
Accumulated other comprehensive loss	$	(538)	$	(951)	$	(581)

(a)The change in the foreign currency translation adjustment was not adjusted for income taxes since it related to indefinite term investments in non-U.S. subsidiaries.

(b)Certain securities deemed available-for-sale by Nortel Networks were measured at fair value. Unrealized holding gains (losses) related to these securities were excluded from net earnings (loss) and were included in accumulated other comprehensive loss until realized. Unrealized gain (loss) on investments was net of tax of nil, nil and $3 for the years ended December 31, 2003, 2002 and 2001, respectively. During the years ended December 31, 2003, 2002 and 2001, realized (gains) losses on investments of $(6), $(4) and $(32), respectively, were reclassified to other income (expense) — net in the consolidated statements of operations.

(c)During the year ended December 31, 2003, net derivative gains of $32 were reclassified to other income (expense) — net. Unrealized derivative gain (loss) on cash flow hedges is net of tax of nil, $1 and $6 for the years ended December 31, 2003, 2002 and 2001, respectively. During the year ended December 31, 2002, $18 of net derivative losses were reclassified to other income (expense) — net. Nortel Networks estimates that $12 of net derivative gains

(losses) included in accumulated other comprehensive loss will be reclassified into net earnings (loss) within the next 12 months. Also included $7 (pre-tax $11) of net derivative losses related to the adoption of SFAS 133 during the year ended December 31, 2001.

(d)Represents non-cash charges to shareholders’ equity related to the increase in the minimum required recognizable liability associated with Nortel Networks pension plans (see note 9). The change in minimum pension liability amount is presented net of tax of $31, $133 and $26 for the years ended December 31, 2003, 2002 and 2001, respectively.

19.Stock-based compensation plans Stock options

Nortel Networks grants options to purchase Nortel Networks Corporation common shares under two existing stock option plans, Nortel Networks Corporation 2000 Stock Option Plan (the “2000 Plan”) and Nortel Networks Corporation 1986 Stock Option Plan As Amended and Restated (the “1986 Plan”). Under these two plans, options to purchase Nortel Networks Corporation common shares may be granted to employees, and under the 2000 Plan, options may be granted to directors of Nortel Networks that entitle the holders to purchase one common share at a subscription price of not less than 100 percent of market value on the effective date of the grant. Subscription prices are stated and payable in U.S. dollars for U.S. options and in Canadian dollars for Canadian options. Generally options granted prior to 2003 vest 33 percent on the anniversary date of the grant for three years. Options granted in 2003 generally vest 25 percent each year over a four year⅓period on the anniversary date of the grant. The committee of the Board of Directors of Nortel Networks that administers both plans has the discretion to vary the period during which the holder has the right to exercise options and, in certain circumstances, may accelerate the right of the holder to exercise options, but in no case shall the exercise period exceed ten years. Nortel Networks will meet its obligations under both plans either by issuance, or by purchase on the open market, of Nortel Networks Corporation common shares.