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The following information provides detailed disclosure in respect of each material component of the Second Restatement adjustments to the
accumulated deficit as of December 31, 2000:
Summary of Second Restatement Adjustments on Accumulated Deficit as of December 31, 2000:
Revenues and cost of revenues adjustments
Revenues were impacted by various errors related to revenue recognition resulting in a cumulative decrease of $3,379 for the years prior to
2001. The net impact to cost of revenues related to these revenue adjustments and other items was a cumulative decrease of $1,214 for the
years prior to 2001.
Revenues were recognized on certain sales for which it was subsequently determined that the criteria for revenue recognition under SAB 101
or SOP 97-2, as applicable, had not been met, including arrangements in which legal title or risk of loss on products did not transfer to the
buyer until full payment was received, and arrangements where delivery had not occurred. Revenues and related cost of revenues for these
arrangements should have been deferred to later periods when title or risk of loss had passed and all criteria for revenue recognition had been
met. Therefore, adjustments were made to defer revenues and related cost of revenues from the periods in which they were originally recorded
and to recognize them in the periods in which all revenue recognition criteria were met.
Revenues were recognized on certain sales for which it was subsequently determined that the criteria for revenue recognition under SOP 97-2
had not been met, including arrangements in which the criteria for fixed or determinable fees was not met. Revenues and related cost of
revenues for these agreements were deferred to later periods when payments became due and all criteria for revenue recognition had been met.
In certain multiple element arrangements, total arrangement fees were recognized as revenue at the time of delivery of software or hardware,
but prior to the delivery of future contractual or implicit PCS or other services. Revenues should have been allocated to these future
deliverables based on their fair value and recognized ratably over the PCS period or as the future obligations were performed. Adjustments
were made to appropriately allocate revenue among the accounting units and recognize the allocated revenue in accordance with the applicable
revenue recognition guidance. In certain circumstances where the criteria to treat delivered software and hardware elements and undelivered
PCS services as separate accounting units were not met, the entire arrangement fee was deferred and recognized over the PCS period.
Revenues were also recognized for certain contracts that involved undelivered elements as a result of product development delays. The lack of
relative fair value for the undelivered element meant that revenues and cost of revenues for all products delivered should have been deferred
until the undelivered element was delivered. As originally recorded, revenues were recognized upon delivery of an alternative product and
costs were accrued for the
33
(millions of U.S. dollars) Total
Adjustments
Revenues $ (3,379)
Cost of revenues (1,214)
Gross profit (2,165)
Income tax benefit 623
Foreign exchange (186)
Other adjustments 296
Net increase to accumulated deficit $ (1,432)