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As part of the plan to address a material weakness reported in our Quarterly Report on Form 10-Q for the period ended September 30, 2003, a
review of foreign exchange accounting was undertaken. The net impact was a decrease to pre-tax loss of $63 and $132 for the years ended
December 31, 2002 and 2001, respectively. The significant items were as follows:
Historically, we had certain intercompany balances that did not eliminate upon consolidation , or out-of-balance positions, and had recorded
provisions accordingly. As part of the Second Restatement, we reviewed these provisions and determined that they should not have been
recorded. We recorded adjustments in the appropriate periods to reverse these provisions and to correct the significant out-of-balance positions.
The net impact of the adjustments to correct the significant out-of-balance positions was a decrease of $36 and an increase of $42 to the
previously reported pre-tax loss for the years ended December 31, 2002 and 2001, respectively.
As part of the Second Restatement, we re-examined the components of special charges, and recorded decreases to special charges of $78 and
$845 for the years ended December 31, 2002 and 2001, respectively. The adjustments are discussed below.
The accounting for the deferred consideration associated with the acquisition of the 980 NPLC business from JDS and the related OEM
Purchase and Sale Agreement in February 2001 was re-examined. Upon re-examination, it was determined that adjustments were required to
reflect the appropriate purchase price and amount allocated to goodwill. The impact of the adjustments was a $473 decrease to special charges
to reduce the goodwill impairment for the year ended December 31, 2001. Other impacts included a decrease to goodwill amortization of $52
for the year ended December 31, 2001 and an increase to cost of revenues of $148 and $152 for the years ended December 31, 2002 and 2001,
respectively, with corresponding reversals of these amounts which were previously recorded against common shares.
As part of the Second Restatement, we determined that adjustments were required for various other acquisitions to the amounts allocated to
goodwill as a result of corrections to purchase accounting allocations, and to correct valuations of consideration paid. The impact of the
adjustments to goodwill was a decrease to special charges of $222 to reduce the impairment of goodwill for the year ended December 31, 2001.
Other impacts included an increase to deferred stock option compensation expense of $24 and $123 for the years ended December 31, 2002
and 2001, respectively, and a decrease to goodwill amortization of $39 for the year ended December 31, 2001.
Also as part of the Second Restatement, we reclassified inventory impairments of $89 to cost of revenues, previously incorrectly classified as
special charges. We also determined that certain items were either recorded in special charges in error or, although correctly recorded when
originally recognized, were not adjusted in the appropriate subsequent periods for changes in estimates and/or assumptions. The adjustments to
special charges for these other items were an increase of $11 and a decrease of $150 for the years ended December 31, 2002 and 2001,
respectively.
We recorded other adjustments primarily to correct certain accruals, provisions and other transactions, which were either initially recorded
incorrectly in prior periods, or not properly released or adjusted for changes in estimates and/or assumptions in the appropriate subsequent
periods. These adjustments decreased the net loss for the year ended December 31, 2002 by $314 and increased the net loss for the year ended
December 31, 2001 by $59, and included tax and minority interests impacts of all Second Restatement adjustments.
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• we re-examined the determination of the functional currency for certain entities based on the guidance under SFAS No. 52,
“Foreign Currency Translation”, or SFAS No. 52. As a result, we identified four instances in which the functional currency
designation of an entity was incorrect. These revisions resulted in increases or decreases to other income (expense)
—
net; and
• we identified two instances of incorrect treatment of foreign currency translation gains and losses arising from significant
intercompany positions. The net impact of the adjustments was an increase or decrease to other income (expense) — net, with an
offset to accumulated other comprehensive loss.
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