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F-68
18.
A
ccumulated other com
p
rehensive 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 o
p
erations.
(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-
b
ased com
p
ensation
p
lans
Stock o
p
tions
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 year period 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.