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defined benefit pension plans (the “Traditional Program”) which are closed to new entrants in the U.K. and portions of which are closed
to new entrants in the U.S. and Canada. Although these four kinds of programs represent Nortel Networks major retirement programs and
may be available to employees in combination and/or as options within a program, Nortel Networks also has smaller pension plan
arrangements in other countries. Certain of the prior year amounts for 2002 and 2001 have been adjusted to include pension plans not
previously presented.
Nortel Networks also provides other benefits, including post-retirement benefits and post-employment benefits. Employees in the
Traditional Program are eligible for their existing company sponsored post-retirement benefits or a modified version of these benefits,
depending on age or years of service. Employees in the Balanced Program are eligible for post-retirement benefits at reduced company
contribution levels, while employees in the Investor Program have access to post-retirement benefits by purchasing a Nortel Networks-
sponsored retiree health care plan at their own cost.
Nortel Networks policy is to fund defined benefit pension and other benefits based on accepted actuarial methods as permitted by
regulatory authorities. The funded amounts reflect actuarial assumptions regarding compensation, interest and other projections. Pension
and other benefit costs reflected in the consolidated statements of operations are based on the projected benefit method of valuation. A
measurement date of September 30 is used annually to determine pension and other post-retirement benefit measurements for the pension
plans and other post-retirement benefit plans that make up the majority of plan assets and obligations.
In 2003, the impact of reductions in discount rates and changes in foreign exchange rates more than offset the favorable impacts of strong
pension asset returns and the voluntary contributions made by Nortel Networks. As a result, Nortel Networks was required to adjust the
minimum pension liability for certain plans, representing the amount by which the accumulated benefit obligation less the fair value of
the plan assets was greater than the recorded liability. The effect of this adjustment was to increase accumulated other comprehensive
loss (before tax) by $219, increase intangible assets by $1 and increase pension liabilities by $220.