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and plant and equipment write downs to ensure that these accruals are still appropriate. As of December 31, 2003, we had $64 in accruals
related to workforce reduction charges and $456 in accruals related to contract settlement and lease costs, which included significant estimates,
primarily related to sublease income over the lease terms and other costs for vacated properties. In certain instances, we may determine that
these accruals are no longer required because of efficiencies in carrying out our restructuring work plan. In these cases, we reverse any related
accrual to income when it is determined it is no longer required. Alternatively, in certain circumstances, we may determine that certain accruals
are insufficient as new events occur or as additional information is obtained. In these cases, we would increase the applicable existing accrual
with the offset recorded against income.
Other contingencies
We are subject to the possibility of various loss contingencies arising in the ordinary course of business. As a result, we consider the likelihood
of loss or impairment of an asset or the incurrence of a liability, as well as our ability to reasonably estimate the amount of loss, in determining
loss contingencies. We recognize a reserve for an estimated loss contingency when it is probable that an asset has been impaired or a liability
has been incurred and the amount of loss can be reasonably estimated. We regularly evaluate current information available to us to determine
whether such accruals should be adjusted.
We are also subject to proceedings, lawsuits, investigations and other claims (some of which may involve substantial dollar amounts),
including proceedings under laws and government regulations related to securities, income and other taxes, environmental, labor, product and
other matters. In particular, our two restatements of our consolidated financial statements and related events have caused us to be subject to
ongoing regulatory and criminal investigations and significant pending civil litigation actions in the U.S. and Canada. We are required to assess
the likelihood of any adverse judgments or outcomes in any of these matters, as well as potential ranges of probable losses. A determination of
the amount of reserves required, if any, for these contingencies is based on an analysis of each individual issue. The required reserves may
change in the future due to new developments in each matter or changes in approach such as a change in settlement strategy in dealing with
these matters. We cannot determine whether these matters will, individually or collectively, have a material adverse effect on our business,
results of operations and financial condition. See “Risk factors/forward looking statements”.
For more information related to our outstanding legal and other proceedings, see “Contingencies” in note 22 of the accompanying consolidated
financial statements.
Accounting changes and recent accounting pronouncements
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ccounting changes
Our consolidated financial statements are based on the selection and application of accounting policies, generally accepted in the U.S. For more
information related to the accounting policies that we adopted as a result of new accounting standards, see “Accounting changes” in note 4 of
the accompanying consolidated financial statements. The following summarizes the accounting changes that we have adopted:
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• Guarantees — the adoption of FASB Interpretation FIN No. 45, “Guarantor’s Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of Others — an Interpretation of FASB Statement Nos. 5, 57 and 107
and Rescission of FIN No. 34” did not have a material impact on our results of operations and financial condition.
• Asset retirement obligations — the adoption of SFAS No. 143, “Accounting for Asset Retirement Obligations”, or SFAS No. 143,
resulted in a decrease to net earnings of $12 (net of tax of nil) which has been reported as a cumulative effect of accounting changes
— net of tax, an increase in plant and equipment — net of $4 and an asset retirement obligation liability of $16 as of January 1,
2003. The adoption of SFAS No. 143 did not have a material impact on depreciation and accretion expense.
• Accounting for costs associated with exit or disposal activities — the adoption of SFAS No. 146, “Accounting for Costs Associated
with Exit or Disposal Activities” did not have a material impact on our results of operations and financial condition.
• Consolidation of variable interest entities — the adoption of FIN 46 resulted in the inclusion of $184 in long-term debt and $183 of
plant and equipment — net. These amounts represented both the collateral and maximum exposure to loss as a result of our
involvement with VIEs.