Reliant FORM 10-K manual Second Pooling Previously, Interest, Reported, Restated

accruals and provisions and the application of accounting literature to certain matters in the Second Restatement, including revenue recognition, foreign exchange, special charges and discontinued operations, was complicated by the passage of time, lack of availability of supporting records and the turnover of finance personnel. As a result of this complexity, estimates and assumptions that impact both the quantum of the various recorded adjustments and the fiscal period to which they were attributed were required in the determination of certain of the Second Restatement adjustments. Nortel Networks S.A. believes the procedures followed in determining such estimates were appropriate and reasonable using the best available information.

The following tables present the impact of the Second Restatement adjustments (and Pooling of Interest adjustments, see notes 2 and 9) to Nortel Networks S.A.’s previously reported consolidated statements of operations and a summary of the adjustments from the Second Restatement for the years ended December 31, 2002 and 2001. The Second Restatement adjustments related primarily to the following items, each of which reflect a number of related adjustments that have been aggregated for disclosure purposes, and are described in the paragraphs following the tables below:

•Accruals and provisions

•Related party transactions

•Plant and equipment

Consolidated Statement of Operations for the year ended December 31, 2002

		As	Second	Pooling of	As
	previously		Restatement	interest	pooled and
	reported		Adjustments	Adjustments	restated
Revenues — external		214,922	–	141,394	356,316
— related parties		473,223	(5,362)	(8,943)	458,918
	688,145		(5,362)	132,451	815,234
Cost of revenues	595,637		(45,011)	49,741	600,367
Gross profit	92,508		39,649	82,710	214,867
Selling, general and administrative expense	31,998		(3,700)	41,184	69,482
Research and development expense	257,585		6,690	–	264,275
Special charges — other special charges	58,854		2,646	21,927	83,427
(Gain) loss on sale of businesses and assets		–	–	16,171	16,171
Operating earnings (loss)	(255,929)		34,013	3,428	(218,488)
Other income (expenses) — net	18,962		(1,486)	5,562	23,038
Foreign exchange gain (loss)	(1,557)		331	(4,305)	(5,531)
Interest expense	(6,524)		(3,280)	(81)	(9,885)
Earnings (loss) before income taxes and minority interest	(245,048)		29,578	4,604	(210,866)
Minority interest — net of tax		–	–	3,052	3,052
Income tax benefit	1,680		–	(40)	1,640
Net earnings (loss)		(243,368)	29,578	7,616	(206,174)

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