Other adjustments | Reliant FORM 10-K specs

undelivered element. To correct for these items, related cost provisions were reversed and revenues and associated cost of revenues were recognized in the appropriate periods when all elements had been delivered.

Revenues were recognized upon product delivery to a certain reseller who lacked economic substance apart from Nortel Networks. Revenue should have been deferred and only recognized by Nortel Networks upon sale by the reseller to an end customer. Correction of this resulted in revenues and cost of revenues being deferred with ultimate recognition in 2001.

Other adjustments included corrections related to errors in the application of percentage-of-completion accounting for certain contracts, specific contracts with reciprocal arrangements that should have been treated as a reduction of revenues, and other errors related to non-cash incentives and concessions provided to customers and other calculation errors.

Other adjustments

The income tax benefit as a result of the restatement decreased the accumulated deficit by $623. The determination of the functional currency for certain entities was re-examined, and as a result Nortel Networks determined that the accounting for certain global headquarter functions needed to be restated back to 1986 to reflect a U.S. dollar functional currency designation. This resulted in an increase of $186 to accumulated deficit and a decrease to accumulated other comprehensive loss as of December 31, 2000. Other adjustments of $296 included the corrections of errors in respect to each of intercompany related items, the accounting associated with sales of receivables, the calculation of the valuation of deferred compensation on certain acquisitions and various other adjustments. Reflected in these adjustments were reclassifications of certain items to or from cost of revenues.

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Reliant FORM 10-K manual Other adjustments

Contents

Securities Exchange Act Washington, D.CAnnual report pursuant to or 15d For the transition period from Explanatory Note Table of Contents Item 9A Part Item 1. Business Overview Developments in 2003 Business environmentPage 2003 Strategic planOther business developments Networking Networking solutionsNetworking solutions Network components Wireless Networks Products Core networking Network accessProduct development Markets Customers Competition Circuit and packet voice solutionsEnterprise Networks Data networking and security solutions Wireline Networks Circuit and packet voice solutions Markets Optical Networks Product development Markets Sales and distribution Backlog Product standards, certification and regulations Sources and availability of materials Seasonality Strategic alliances, acquisitions and minority investments Research and development Intellectual property Employee relations Environmental matters Financial information by geographic area Working capital Risk factors Number of Sites Owned Leased Item 2. PropertiesType of Site Geographic Locations Item 3. Legal Proceedings Page Page Environmental matters Item 4. Submission of Matters to a Vote of Security Holders High Low Sales of unregistered securities DividendsCanadian tax matters Dividends Item 6. Selected Financial Data Unaudited 2003 2002 2001 2000 Revenues and cost of revenues adjustments Total Other adjustments Business overview Accounting changes and recent accounting pronouncements Our segments Business overviewOur business Our business environment How we measure performance Our strategic plan and outlook Consolidated results summary Comprehensive Review and First Restatement Years ended December 31, 2002 Independent ReviewSecond Restatement Revenues and cost of revenues Special charges Foreign exchangeIntercompany balances Other Dis operations First, second and third quartersReclassifications Page Revenues and cost of revenues Intercompany balances EDC Support Facility Revenue Independent ReviewPersonnel actions Credit facilities and security agreements Debt securities Regulatory actions and pending litigation Shelf registration statementCredit ratings Stock-based compensation plans Shareholder rights plan Evolution of our supply chain strategyOther business developments Sale of Entrust shares Ownership adjustment in our French and German operationsCustomer financing commitments Real estate Segment revenues Results of operations continuing operationsCustomer financing arrangements Geographic revenues 2004 2003 vs2002 vs Wireless Networks revenues 2002 vs Enterprise Networks revenues 2002 vs Wireline Networks revenues Optical Networks revenues 2002 vs Segment gross profit and gross margin Wireless NetworksGross profit and gross margin For the years ended December 2003 vs 2002 vs 2001 Optical Networks Wireline NetworksEnterprise Networks Operating expenses Selling, general and administrative expenseSegment selling, general and administrative expense For the years ended December 2003 vs 2002 vs 2001 $ Change Research and development expense Segment research and development expense Amortization of intangibles Segment contribution marginSegment Management EBT Deferred stock option compensation Special charges Page Gain loss on sale of businesses and assets Other income expense net Income tax benefit expense Results of operations dis operationsInterest expense Net earnings loss from continuing operations 2003 2002 Liquidity and capital resourcesCash flows Page Uses of liquidity Outsourcing contracts Contractual cash obligationsPurchase obligations Obligations under special charges Pension, post-retirement and post-employment obligations JDS purchase arrangementCustomer financing Other long-term liabilities reflected on the balance sheets Sources of liquidity Joint ventures/minority interestsDis operations Credit facilities Shelf registration statement and base shelf prospectus Bid, performance related and other bonds Off-balance sheet arrangementsCredit ratings Other indemnifications or guarantees Application of critical accounting estimates Revenue recognition Provisions for doubtful accounts Provisions for inventory Income taxes Tax asset valuation Tax contingencies Goodwill valuation Pension and post-retirement benefits Special charges Change in Assumption Accounting changes Accounting changes and recent accounting pronouncementsOther contingencies Recent accounting pronouncements Market risk Equity price risk Risks relating to our restatements and related matters Legal proceedingsRisk factors/forward looking statements Page Operations, financial condition and liquidity Page Page Page Page Risks relating to our business Page Page Page Page 104 Page Page Page Page Page Page Page Index to Consolidated Financial Statements Report of Independent Registered Chartered Accountants Nortel Networks Corporation Consolidated Balance Sheets as of December Assets Total comprehensive income loss for the year Cash flows from used in operating activities Basis of presentation Nortel Networks CorporationSignificant accounting policies Principles of consolidation Translation of foreign currencies Revenue recognition Research and development Cash and cash equivalents Income taxesEarnings loss per common share Restricted cash and cash equivalents Plant and equipment Receivables salesInvestments Long-lived assets held and used Goodwill Pension, post-retirement and post-employment benefits Warranty costsIntangible assets Derivative financial instruments Stock-based compensation 2003 2002 2001 2003 2002 2001 Black-Scholes weighted-average assumptionsWeighted-average stock option fair value per option granted Comparative figures Recent accounting pronouncements Second Restatement RestatementFirst Restatement Page Page 121 Total restatement adjustments 289 183 314 272 Page Revenues and cost of revenues Application of SAB 101 or SOP Revenue recognition adjustmentsOther adjustments Revenues Cost of revenues 2002 2001 Reseller transactions Other revenue recognition adjustmentsPresentation errors Foreign exchange Intercompany transaction designation Other errorsFunctional currency designation Goodwill impairment 980 Nplc business acquisition Other Goodwill impairment other acquisitionsOther special charges Cost of revenues Selling, general and administrative expense2002 2001 Other adjustments Research and development expense Income taxes and minority interests Other income expense netInterest expense Reclassifications Dis operations Decrease to net loss on disposal of operations net of tax Other adjustments Balance sheet Accounting changes GuaranteesConsolidated Balance Sheet as of December 31 Asset retirement obligations Consolidation of variable interest entitiesPage Stock-based compensation Determining whether an arrangement contains a leasePensions and other post-retirement benefits Accounting for goodwill and other intangible assets 23,270 Consolidated statements of operations Derivative financial instrumentsConsolidated financial statement details Inventories net Consolidated balance sheetsAccounts receivable net Other current assets Intangible assets net Wireless Enterprise WirelineGoodwill Other accrued liabilities Minority interests in subsidiary companies Interest and taxes paid recoveredOther liabilities Change in operating assets and liabilities Receivables sales Segment information General description 2003 2002 2001 Revenues SegmentsProduct revenues Contribution margin Geographic information Long-lived assets Special charges Year ended December 31 During December 2003 Lease costs a Accrued Costs Payments Adjustments Balance as Incurred MadeJanuary Year ended December 31 Income taxes 2003 2002 2001 Credits b Total Employee benefit plansNet Operating Capital Tax Losses Page 2003 2002 Change in benefit obligation Change in plan assets Defined benefit plans 20032002 2003 2002 2001 Pension expenseAllocation of net pension expense 2003 2002 2001 Post-retirement benefit cost 2003 2002 Target ActualPage Acquisition Price Goodwill Technology Other acquisitionsNet tangible Deferred Closing date Purchase Compensation Sale of Arris Group, Inc. investment Service commerce operationsDivestitures High speed module operations Long-term debt, credit and support facilities Sale of ClarifyClosures Long-term debt Credit facilities Risk management Support facilityFinancial instruments and hedging activities Foreign currency risk 2003 2002 Interest rate swap contracts Equity price riskFair value Cross currency coupon swap contracts Receivables sales Credit riskOther derivatives Fair Intellectual property indemnification obligations GuaranteesBusiness sale and business combination agreements Lease agreements Third party debt agreements Commitments Other indemnification agreementsProduct warranties Bid, performance related and other bonds Customer financing Venture capital financing Operating Outsourcing Purchase commitmentsOperating leases and other commitments Leases Contracts Charges Income Restricted cash and cash equivalents Capital stock Common shares Prepaid forward purchase contracts Shareholder rights plan Preferred sharesDividends Earnings loss per common share Accumulated other comprehensive loss Stock-based compensation plans Stock options Maximum Restricted stock unit plan Options Directors’ deferred share compensation plans Employee stock purchase plans Dis operations Activity 2003 2002 2001 Cash flows from used in dis operations Activity Related party transactions ContingenciesPage Page Environmental matters Subsequent events EDC Support Facility Credit facilities and security agreements Stock-based compensation plans Directory and operator services businessDebt securities Stock exchanges Evolution of Nortel Networks supply chain strategy Supplemental consolidating financial information Nortel Non Nortel Non 612 450 15,364 380 Supplemental Consolidating Balance Sheets as of December 31 182 240 413 388 262 16,961 Nortel Non Networks 818 592 487 525 768 572 111 648 206 Quarterly Financial Data Unaudited Report of Independent Registered Chartered Accountants Charged Schedule ConsolidatedAdditions Beginning To costs End Item 9A. Controls and Procedures 114 Scope of the Independent Review Summary of Findings of the Independent Review Page Page Page Governing Principles for Remedial Measures Page Page Page Page Additional Background Page Second Restatement Independent Review Second Restatement Process Page Fixed or determinable fees-An increase of $133 million Page Principal Adjustments Page Page Revenue Independent Review Remedial Measures Page Name Age Position with the Company Page Page Page Year Name and age Office and position currently held Appointment Subsequent appointment Audit committee Beneficial ownership reporting complianceAudit committee financial expert Code of ethics and other corporate governance matters Item 11. Executive Compensation Summary compensation table Annual Compensation Long Term Compensation Name Principal PositionYear Salary Bonus 147 148 149 150 Annual cash incentive awards Option grants in 2004 In-the-Money CommonValue of Unexercised Realized $ Exercisable 152 Dunn Debon Spradley Bolouri DeRoma Exercisable Unexercisable Long-term incentive plans awards in last two fiscal years Maturation or Payout Threshold# Target# Maximum# #12 Retirement plans Page Total Earnings Certain employment arrangements Page Compensation of directors Compensation committee interlocks and insider participation Security ownership of directors and management Name of Beneficial Owner Title of Class of Security 163 Equity compensation plan information Plan category Item 13. Certain Relationships and Related Transactions Indebtedness of management Audit Fees Item 14. Principal Accountant Fees and ServicesTable of Indebtedness of Directors and Executive Officers January 1 All Other Fees Audit-Related FeesTax Fees Reports on Form 8-K Page Page Page Number Description Exhibit IndexExhibit Number Description Number Description Number Description Number Description Number Description Subsidiary of Nortel Networks Limited Report of Independent Registered Public Accounting Firm 182 183 184 Nortel Networks S.A Nortel Networks S.A Use of estimates Research and development Cash and cash equivalents Plant and equipment State sponsored pension plans Financial instruments 192 Restatement Reported Second Pooling PreviouslyInterest Restated Accruals Interest Pooled Reported 2002 2001 Increase decrease of cost of revenues Accruals and provisionsNet increase decrease to net loss Net increase decrease of cost of revenues 2002 2001 Increase decrease of research and development Other expensesRelated party transactions Net increase decrease of research and development Related party out of balances Residual profit sharingRelated party revenues and cost of revenues Plant and equipment Costs of revenues, research and development expense Interest on long- term debt Guarantees Consolidated Balance Sheets as of December 31 Asset retirement obligations Consolidation of variable interest entities Accounting for goodwill and other intangible assets Determining whether an arrangement contains a leaseStock-based compensation Derivative financial instruments 204 Investment at cost net WirelessWireline Optical Networks Long-term debt Segment information General description Major customers 2003 2002 2001 External revenues Geographic informationLong-lived assets Contract Expected sublease revenue on leases Income taxes Nortel Networks France Acquisitions and divestitures AcquisitionsNorthern Telecom France Matra Nortel Communication Distribution Other profit sharing agreements Financing transactions RoyaltiesSale of investment Financial instruments Share pledge Joint ventures/minority interests/disposed business Shareholders’ equity Leases Contracts Plan a Outstanding Weighted Options Nortel Networks Company Savings Plan Security agreements Page Signatures Directors