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ecent accounting pronouncements
On December 8, 2003, the Medicare Prescription Drug, Improvement and Modernization Act of 2003, or the MPDIM Act, was signed into law
in the U.S. The MPDIM Act introduced a prescription drug benefit under Medicare (specifically, Medicare Part D) as well as a federal subsidy
to sponsors of retiree health care benefit plans that provide a benefit that is at least actuarially equivalent to Medicare Part D. As permitted by
FASB Staff Position, or FSP, Financial Accounting Standard, or FAS 106-1, “Accounting and Disclosure Requirements Related to the
Medicare Prescription Drug, Improvement and Modernization Act of 2003”, we chose to make the one-time deferral election which remained
in effect for our plans in the U.S. until the earlier of the issuance of specific authoritative guidance by the FASB on how to account for the
federal subsidy to be provided to plan sponsors under the MPDIM Act, or the remeasurement of plan assets and obligations subsequent to
January 31, 2004. Therefore, our post-retirement benefit obligation as of December 31, 2003 and net post-retirement benefit cost for the year
ended December 31, 2003 did not reflect the effects of the MPDIM Act on the plans. On May 19, 2004, FSP FAS 106-2, “Accounting and
Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003”, or FSP FAS 106-2, was
issued by the FASB to provide guidance relating to the prescription drug subsidy provided by the MPDIM Act. We expect to have portions of
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• Accounting for certain financial instruments with characteristics of both liabilities and equity — the adoption of SFAS No. 150,
“Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity” did not have a material impact
on our results of operations and financial condition.
• Accounting for revenue arrangements with multiple deliverables — the adoption of Emerging Issues Task Force 00-21, “Revenue
Arrangements with Multiple Deliverables” did not have a material impact on our results of operations and financial condition.
• Amendment of SFAS No. 133 on derivative instruments and hedging activities — the adoption of SFAS No. 149, “Amendment of
SFAS No. 133 on Derivative Instruments and Hedging Activities” did not have a material impact on our results of operations and
financial condition.
• Determining whether an arrangement contains a lease — the impact of the adoption of the Emerging Issues Task Force 01-8,
“Determining Whether an Arrangement Contains a Lease” on our future results of operations and financial condition will depend
on the terms contained in contracts signed or contracts amended in the future.
• Pensions and other post-retirement benefits — the adoption of SFAS No. 132 (Revised 2003), “Employers’ Disclosures about
Pensions and Other Post-retirement Benefits” requires additional disclosures regarding defined benefit pension plan and other post-
retirement benefit plan assets, obligations, cash flows and net cost as well as retaining a number of disclosures required by SFAS
No. 132, “Employers’ Disclosures about Pensions and Other Post-retirement Benefits”. The applicable current year requirements
have been applied in the presentation of the consolidated financial statements.
• Stock-based compensation — we adopted SFAS No. 148, “Accounting for Stock-Based Compensation — Transition and
Disclosure — an Amendment of FASB Statement No. 123” which amended the transitional provisions of SFAS No. 123,
“Accounting for Stock-based Compensation” for companies electing to recognize employee stock-based compensation using the
fair value based method. Effective January 1, 2003 we elected to expense employee stock-based compensation using the fair value
based method prospectively for all awards granted, modified, or settled on or after January 1, 2003. The impact of the adoption of
the fair value based method for expense recognition of employee awards resulted in $26 (net of tax of nil) of stock option expense
during 2003.
• Accounting for goodwill and other intangible assets — the adoption of SFAS No. 142, effective January 1, 2002, which changed
the accounting for goodwill from an amortization method to an impairment approach, had a material impact on our results of
operations and financial condition through the elimination of amortization expense.
• Impairment or disposal of long-lived assets (plant and equipment and acquired technology) — the adoption of SFAS No. 144,
“Accounting for the Impairment or Disposal of Long-Lived Assets” resulted in write downs for plant and equipment of $382 related
to long-lived assets held and used, and $38 related to long-lived assets held for sale for the year ended December 31, 2002. See
“Special charges” in note 7 of the accompanying consolidated financial statements for further information regarding these write
downs.
• Derivative financial instruments — the adoption of SFAS No. 133 and the corresponding amendments under SFAS No. 138,
“Accounting for Certain Derivative Instruments and Certain Hedging Activities — an Amendment of SFAS No. 133” resulted in a
cumulative decrease in net loss of $15 (net of tax of $9), which has been reported as cumulative effect of accounting changes-net of
tax and a charge to other comprehensive income of $7 (net of tax of $4) in 2001.