Dell 2001 Annual Report Download - page 42

Table of Contents
Intangible Assets.SFAS 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001, as well as all
purchase method business combinations completed after June 30, 2001. SFAS 141 also details criteria that intangible assets acquired in a business
combination must meet in order to be recognized and reported as assets apart from goodwill. SFAS 142 requires that goodwill and intangibles with indefinite
useful lives no longer be amortized, but instead tested for impairment at least annually. SFAS 142 is required to be applied starting with fiscal years beginning
after December 15, 2001, with early application permitted in certain circumstances. Since the Company has no purchased goodwill or other intangibles, the
adoption of these statements has no current effect on the Company's financial condition or results of operations.
In August 2001, the FASB issued SFAS 144, Accounting for the Impairment or Disposal of Long-Lived Assets, which addresses financial accounting and
reporting for the impairment or disposal of long-lived assets. SFAS 144 develops one accounting model (based on the model in SFAS 121) for long-lived
assets that are to be disposed of by sale, as well as addresses the principal implementation issues. SFAS 144 requires that long-lived assets that are to be
disposed of by sale be measured at the lower of book value or fair value less cost to sell. SFAS 144 is effective for financial statements issued for fiscal years
beginning after December 15, 2001 and, generally, its provisions are to be applied prospectively. The adoption of this statement is not expected to have a
material effect on the Company's financial condition or results of operations.
Reclassifications — Certain prior year amounts have been reclassified to conform to the fiscal 2002 presentation.
NOTE 2 — Special Charges
During the second quarter of fiscal 2002, the Company undertook a program to reduce its workforce and to exit certain activities during fiscal 2002 to align its
cost structure with ongoing economic and industry conditions. A special charge of $482 million related to these actions was recorded in operating expenses in
the second quarter. A summary of this charge is as follows (in millions):
Liability at
Total Non-Cash February 1,
Charge Paid Charges 2002
Employee separations $ 134 $ (118) $ — $ 16
Facility consolidations 169 (46) (79) 44
Other asset impairments and exit costs 179 (16) (152) 11
Total $ 482 $ (180) $ (231) $ 71
As part of this undertaking, the Company eliminated approximately 4,000 employee positions worldwide from various business functions and job classes. The
employee separations charge was $91 million, $41 million and $2 million in the Americas, Europe and Asia-Pacific Japan segments, respectively. The facility
consolidations charge in the Americas, Europe and Asia Pacific-Japan segments amounted to $80 million, $76 million and $13 million, respectively. Non-
cash charges consisted primarily of buildings being exited and equipment, technology/software, and other assets being abandoned or disposed of as part of
these actions. This included $75 million to write off goodwill and substantially all intellectual property associated with the fiscal 2000 acquisition of
ConvergeNet Technologies, Inc. (ConvergeNet) discussed below due to the Company's decision to discontinue the development of ConvergeNet's proprietary
storage technology. The remaining $71 million liability (including $16 million related to employees previously terminated) as of February 1, 2002, is
expected to be substantially liquidated by the end of the second quarter of fiscal 2003, except for approximately $25 million related to net lease expenses that
will be paid over the respective lease terms through fiscal 2006.
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