Reliant FORM 10-K manual Costs of revenues, research and development expense

Costs of revenues, research and development expense

Adjustments to cost of revenues and research and development were mainly driven by corrections of errors in the depreciation periods of various plant and equipment, items that had been classified as plant and equipment in error and that should have been expensed, as well as the timing of the write off of certain plant and equipment. Adjustments to other expenses were related to items that had been classified as fixed assets in error and that should have been expensed, as well as a reclassification of selling, general and administration expense to interest payment (see below “Interest on long term debt”).

Interest on long- term debt

As part of the Second Restatement process, the accounting for a lease transaction entered into by Nortel Networks S.A. in 1999 was also reviewed and it was determined that the lease had incorrectly been recorded as an operating lease. The lease should have been classified as a capital lease in accordance with SFAS No. 98 and was therefore restated as such. The impact on the balance sheet of Nortel

Networks S.A. as of December 31, 2002 of that restatement was an increase of plant and equipment by					79,028, an increase of the long
term debt by	76,457 and an increase of the short term debt by		3,073. The related interest expense were also reclassified from selling,
€		€	€199	€	€
general and administration expense to interest expense for		3,280 and		2,821 for the years ending December 31, 2002 and 2001

respectively. That restatement had no impact on net earnings.

Consolidated balance sheet as at December 31, 2002, as restated

In addition to the effects on the consolidated statements of operations discussed above, the restatement impacted the consolidated balance sheet as at December 31, 2002. The following consolidated balance sheet presents the cumulative impact of the restatement adjustments described above classified by balance sheet line item as at December 31, 2002.