Analyzing and interpreting restructuring cost and effects Smithburg Inc. reports the following footnote disclosure exerted in its 2010 10-K relating to its re-structuring programs. ? Fiscal 2010 acquisitions on July 1, 2010 SB completed the acquisition of palm and initiated a plan to restructure the operations of palm, including severance for palm employees contract cancellation cost and other items the total expected cost of the plan is $46 million on April 12, 2010 SB completed the acquisition of 3C and connection with the acquisition SV management approved and initiated a plan to restructure the operations of 3C including severance cost and costs To vacate duplicative facilities, the total expected cost of the plan is $42 million and fiscal 2010 SB recorded restructuring charges of approximately $18 million. Fiscal 2010 ES RESTRUCTURING PLAN: on June 1, 2010 SB management announced a plan to restructure its enterprise service business. The total expected cost the plan that will be recorded as restructuring charges is approximately $1 billion including severance cost to eliminate approximately nine positions and infrastructure charges. For fiscal 2010, a restructuring charge of $650 million was recorded primarily related to severance cost as of October 31, 2010 approximately 2100 positions have been eliminated. Fiscal 2009 restructuring plan: In May 2009 SB's management approved and initiated a restructuring plan to structurally change and improve the effectiveness of several businesses the total cost the plan is $292 million in severance related cost associated with the planned elimination of approximately 5000 positions as of October 31, 2010 approximately 4200 positions had been eliminated. Fiscal 2008 SB/ EDS restructuring plan: in accordance with the acquisition of EDS on August 26, 2008 SP management approved and initiated restructuring plan to combine and align as be services businesses eliminate duplicated overhead functions and consolidate and vacate duplicated facilities. The restructuring plan is expected to be implemented over four years at a total expected cost of $3.4 billion. The adjustments to the accrued restructuring expenses related to all of SB's restructuring plans described above for the 12 months and October 31, 2010 were as follows. A: which of the following is not an example of a common non-cash charge associated with corporate restructuring activities? B: using the financial statements template show the effects on financial statements of the (1) 20190 restructuring charge of 1,168 million and (2) 2010 cash payment of 716 million. C: assume that instead of accurately estimating the anticipated restructuring charge in 2010 the company over estimated them by 60 million (1) how would this overestimation affect financial statements in 2010? ( understates the expense and overstated pretax income by 60 million the restructuring liability on the 2010 balance sheet will be overstated by 60 million, overstates the expense and understates pretax income by 60 million the restructuring liability on the 2010 balance sheet will be understated by 60 million, understates the expense and understates pretax income by 60 million the restructuring liability on the 2010 balance sheet will be overstated by 60 million, or overstated the expense and understates pretax income by 60 million the restructuring liability on the 2010 balance sheet will be overstated by 60 million) (2) how would this overestimation affect Financial statements in 2011 when severance cost our paid in cash? ( the cash paid out in 2011 will be more than the 2010 any excess (60 million) would increase expense ( decreasing profit) in 2011, the overestimation from 2010 will have no effect on the 2011 balance sheet or income sheet, the cash paid out in 2011 will be less than the 2010 accrual any excess (the 60 million) would reduce expense (increase profit) in 2011, or the cash paid out in 2011 will be less than the 2010 accrual any excess (the 60 million) would increase expense (decrease profit) in 2011

Fiscal year Non-cash Balance 2010 settlements Balance October charges Cash & other October (in millions) 31, 2009 (reversals) payments adjustments 31, 2010 Fiscal 2010 acquisitions $ - $ 94 $ (20) $ - $ 74 Fiscal 2010 ES Plan: Severance 630 (55) 45 620 Infrastructure 20 (6) (10 Total 2010 ES Plan 650 (61) 35 624 Fiscal 2009 Plan 248 (5) (177) (9) 57 Fiscal 2008 SB/EDS Plan: Severance 747 236 273 ) (35) 675 Infrastructure 419 193 (185) (19) 408 Total 2008 SB/EDS Plan 1,166 429 (458) '54) 1,083 Total restructuring plan $ 1,414 $ 1,168 $ (716) $ (28) $ 1,838 (a) Which of the following in NOT an example of a common non-cash charge associated with corporate restructuring activities? OInventory revaluations OSeverance paid to employees OFixed-asset write-downs Oimpairment charges on intangible assets (b) Using the financial statement effects template, show the effects on financial statements of the (1) 2010 restructuring charge of $1, 168 million, and (2) 2010 cash payment of $716 million. Use negative signs with your answers, when appropriate. Balance Sheet (in $ millions) Income Statement Transaction Cash Asset + Noncash Assets = Liabilities + Contributed Capital + Earned Capital Revenue - Expenses = Net Income (1) (2)