Recent Accounting Pronouncements

9 Months Ended

Jan. 02, 2015

Recent Accounting Pronouncements [Abstract]

Recent Accounting Pronouncements

Defined Benefit Pension Plan Accounting Policy Changes

During the first quarter of fiscal 2015, the Company changed its accounting policy for the recognition of actuarial gains and losses for its defined benefit pension and other post-retirement benefit plans and the calculation of expected return on pension plan assets. Historically, the Company recognized actuarial gains and losses in excess of 10% of the greater of the market-related value of plan assets or the plans’ projected benefit obligations (the “corridor”) as a component of accumulated other comprehensive loss in its Consolidated Condensed Balance Sheets and, depending on the benefit plan, the Company amortized these gains and losses to earnings either over the remaining average service period for the active participants or over the average remaining life expectancy of the inactive participants. Additionally, for the Company’s U.S. plans and the Australian plan, the Company previously used a calculated value for the market-related valuation of pension plan assets, reflecting changes in the fair value of plan assets over a three-year and a one-year period, respectively. Under the Company’s new accounting policies, the Company recognizes changes in actuarial gains and losses and the changes in fair value of plan assets in earnings at the time of plan remeasurement, annually during the fourth quarter of each year, or if there is an interim remeasurement, as a component of net periodic (benefit)/cost (and the Company no longer applies a corridor and, therefore, no longer defers any gains or losses) . The new accounting policies result in the changes in actuarial gains and losses and the changes in fair value of plan assets being recognized in earnings in the year they occur, rather than amortized over time, and therefore recognized earlier than under the Company’s previous methods of accounting. The Company believes the new pension accounting policies are preferable as they recognize the effects of plan investment performance, interest rate changes, and changes in actuarial assumptions as a component of earnings in the year in which they occur rather than amortized over time, and additionally, conform all plans to a consistent policy for determining market-related value of plan assets. These changes have been reported through retrospective application of the new accounting methods to all periods presented. The remaining components of pension/post-retirement expense, primarily current period service and interest costs and expected return on plan assets, will continue to be recorded on a quarterly basis. The cumulative effect of the retrospective application of new accounting policies was a decrease of $1.5 billion in retained earnings and a corresponding decrease in accumulated other comprehensive losses as of the beginning of fiscal 2014.

In addition to the above mentioned accounting policy changes, the Company also changed the way in which it allocates the elements of net periodic pension (benefit) cost to its reportable segments to be aligned with changes in how the Company's chief operating decision maker evaluates segment performance. Historically, total net periodic pension (benefit) cost, including the amortization of deferred actuarial losses/(gains) and changes in fair value of plan assets, were reported within operating income, as defined by the Company, and fully allocated to reportable segments. Under the new allocation approach, net actuarial gains and losses as well as settlement gain and losses components of the net periodic pension (benefit) cost are excluded entirely from the Company’s definition of operating income and not allocated to the reportable segments. All of the other elements of net periodic pension (benefit)/cost, excluding actuarial gains and losses and settlement gains and losses, will continue to be included within operating income of the Company’s reportable segments. The Company has applied the change in the allocation approach retrospectively, adjusting segment reporting for all prior periods presented (see Note 15).

The following tables present the effects of retrospectively applying the change in the pension accounting policies, on select line items of the accompanying unaudited Consolidated Condensed Financial Statements:

Impact on Consolidated Condensed Statements of Operations

	Quarter ended January 2, 2015
	Previous accounting methods			As Reported			Impact of change in accounting method
(Amounts in millions, except per-share amounts)							Increase/(Decrease)
Costs of services	$	2,299		$	2,530		$	231
Selling, general and administrative expenses	333			356			23
Loss from continuing operations, before taxes	(164		)	(418		)	(254		)
Taxes on income	6			(105		)	(111		)
Loss from continuing operations	(170		)	(313		)	(143		)
Net loss	(170		)	(313		)	(143		)
Net loss attributable to CSC common stockholders	(171		)	(314		)	(143		)
Basic EPS - Continuing operations	$	(1.22	)	$	(2.23	)	$	(1.01	)
Diluted EPS - Continuing operations	$	(1.22	)	$	(2.23	)	$	(1.01	)

	Quarter ended December 27, 2013
	As previously reported			As Reported			Impact of change in accounting method
(Amounts in millions, except per-share amounts)							Increase/(Decrease)
Costs of services	$	2,362		$	2,261		$	(101	)
Selling, general & administrative expenses	354			318			(36		)
Income from continuing operations, before taxes	221			358			137
Taxes on income	70			77			7
Income from continuing operations	151			281			130
Net income	146			276			130
Net income attributable to CSC common stockholders	141			271			130
Basic EPS - Continuing operations	$	0.99		$	1.88		$	0.89
Diluted EPS - Continuing operations	$	0.98		$	1.84		$	0.86
Diluted EPS - Discontinued operations	$	(0.04	)	$	(0.03	)	$	0.01

	Nine months ended January 2, 2015
	Previous accounting methods		As Reported			Impact of change in accounting method
(Amounts in millions, except per-share amounts)						Increase/(Decrease)
Costs of services	$	6,907	$	7,101		$	194
Selling, general and administrative expenses	1,028		1,046			18
Income from continuing operations, before taxes	253		41			(212		)
Taxes on income	118		18			(100		)
Income from continuing operations	135		23			(112		)
Net income	106		(6		)	(112		)
Net income (loss) attributable to CSC common stockholders	95		(17		)	(112		)
Basic EPS - Continuing operations	$	0.88	$	0.08		$	(0.80	)
Diluted EPS - Continuing operations	$	0.86	$	0.08		$	(0.78	)

	Nine months ended December 27, 2013
	As previously reported		As Reported		Impact of change in accounting method
(Amounts in millions, except per-share amounts)					Increase/(Decrease)
Costs of services	$	7,156	$	7,015	$	(141	)
Selling, general and administrative expenses	962		920		(42		)
Income from continuing operations, before taxes	648		831		183
Taxes on income	206		227		21
Income from continuing operations	442		604		162
Loss from discontinued operations, net of taxes	72		91		19
Net income	514		695		181
Net income attributable to noncontrolling interest, net of tax	14		18		4
Net income attributable to CSC common stockholders	500		677		177
Basic EPS - Continuing operations	$	2.88	$	3.96	$	1.08
Basic EPS - Discontinued Operations	$	0.49	$	0.61	$	0.12
Diluted EPS - Continuing operations	$	2.83	$	3.88	$	1.05
Diluted EPS - Discontinued operations	$	0.48	$	0.60	$	0.12

Impact on Consolidated Condensed Statements of Comprehensive (Loss) Income

	Quarter ended January 2, 2015
	Previous accounting methods			As Reported			Impact of change in accounting method
(Amounts in millions)							Increase/(Decrease)
Net loss	$	(170	)	$	(313	)	$	(143	)
Foreign currency translation adjustments	(78		)	(90		)	(12		)
Pension and other post-retirement benefit plans, net of taxes	(103		)	52			155
Other comprehensive loss, net of taxes	(183		)	(40		)	143

	Quarter ended December 27, 2013
	As previously reported			As Reported			Impact of change in accounting method
(Amounts in millions)							Increase/(Decrease)
Net income	$	146		$	276		$	130
Foreign currency translation adjustments	(3		)	(9		)	(6		)
Pension and other post-retirement benefit plans, net of taxes	399			260			(139		)
Other comprehensive income, net of taxes	396			251			(145		)
Comprehensive income	542			527			(15		)
Comprehensive income attributable to noncontrolling interest	5			5			—
Comprehensive income attributable to CSC common stockholders	537			522			(15		)

	Nine months ended January 2, 2015
	Previous accounting methods			As Reported			Impact of change in accounting method
(Amounts in millions)							Increase/(Decrease)
Net income (loss)	$	106		$	(6	)	$	(112	)
Foreign currency translation adjustments	(168		)	(189		)	(21		)
Pension and other post-retirement benefit plans, net of taxes	(85		)	48			133
Other comprehensive loss, net of taxes	(261		)	(149		)	112

	Nine months ended December 27, 2013
	As previously reported			As Reported		Impact of change in accounting method
(Amounts in millions)						Increase/(Decrease)
Net income	$	514		695		$	181
Foreign currency translation adjustments	(90		)	(93	)	(3		)
Pension and other post-retirement benefit plans, net of taxes	460			260		(200		)
Other comprehensive income, net of taxes	370			167		(203		)
Comprehensive income	884			862		(22		)
Comprehensive income attributable to noncontrolling interest	18			27		9
Comprehensive income attributable to CSC common stockholders	866			835		(31		)

Impact on Consolidated Condensed Balance Sheets

	As of January 2, 2015
	Previous accounting methods			As Reported		Impact of change in accounting method
(Amounts in millions)						Increase/(Decrease)
Earnings retained for use in business	$	2,402		$	1,101	$	(1,301	)
Accumulated other comprehensive (loss) income	(1,159		)	141		1,300
Noncontrolling interest in subsidiaries	24			25		1

	As of March 28, 2014
	As previously reported			As Reported		Impact of change in accounting method
(Amounts in millions)						Increase/(Decrease)
Earnings retained for use in business	$	2,770		$	1,592	$	(1,178	)
Accumulated other comprehensive (loss) income	(898		)	279		1,177
Noncontrolling interest in subsidiaries	31			32		1

Impact on Consolidated Condensed Statements of Cash Flows

	Nine months ended January 2, 2015
	Previous accounting methods			As Reported			Impact of change in accounting method
(Amounts in millions)							Increase/(Decrease)
Net income (loss)	$	106		$	(6	)	$	(112	)
Pension & OPEB actuarial & settlement losses (gains)	—			463			463
Decrease in liabilities	(130		)	(481		)	(351		)

	Nine months ended December 27, 2013
	As previously reported			As Reported			Impact of change in accounting method
(Amounts in millions)							Increase/(Decrease)
Net income	$	514		$	695		$	181
Pension & OPEB actuarial & settlement losses (gains)	—			(114		)	(114		)
Gain on dispositions	(83		)	(95		)	(12		)
Decrease in liabilities	(358		)	(413		)	(55		)

Recent Accounting Pronouncements

New Accounting Standards

During the first nine months of fiscal 2015, the Company adopted the following Accounting Standard Update (ASU):

In February 2013, the Financial Accounting Standards Board (FASB) issued ASU No. 2013-04, "Obligations Resulting from Joint and Several Liability Arrangements for which the Total Amount of the Obligation Is Fixed at the Reporting Date” (ASU 2013-04). ASU 2013-04 requires an entity to measure obligations resulting from joint and several liability arrangements for which the total amount of the obligation within the scope of this guidance is fixed at the reporting date, as the sum of the amount the reporting entity agreed to pay on the basis of its arrangement among its co-obligors and any additional amount the reporting entity expects to pay on behalf of its co-obligors. The guidance in ASU 2013-04 also requires an entity to disclose the nature and amount of the obligation as well as other information about those obligations. The amendments in ASU 2013-04 are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. Effective March 29, 2014, CSC adopted the amendments in ASU 2013-04 and determined that they did not have a material effect on CSC’s Consolidated Condensed Financial Statements.

Standards Issued But Not Yet Effective

The following ASUs were recently issued but have not yet been adopted by CSC:

In August 2014, the FASB issued ASU No. 2014-15, “Presentation of Financial Statements - Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern” (ASU 2014-15). ASU 2014-15 is intended to define management’s responsibility to evaluate whether there is substantial doubt about an organization’s ability to continue as a going concern and to provide related footnote disclosures. This ASU provides guidance to an organization’s management, with principles and definitions that are intended to reduce diversity in the timing and content of disclosures that are commonly provided by organizations today in the financial statement footnotes. The amendments are effective for annual periods ending after December 15, 2016, and interim periods within annual periods beginning after December 15, 2016. Early adoption is permitted for annual or interim reporting periods for which the financial statements have not previously been issued. ASU 2014-15 will be effective for CSC for fiscal 2017. CSC believes that the adoption of ASU 2014-15 will not have a material effect on CSC's Consolidated Condensed Financial Statements.

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” (ASU 2014-09). ASU 2014-09 supersedes the revenue recognition requirements in ASC Topic 605, “Revenue Recognition” and some cost guidance included in ASC Subtopic 605-35, Revenue Recognition - Construction-Type and Production-Type Contracts”. The core principle of ASU 2014-09 is that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which CSC expects to be entitled in exchange for those goods or services. ASU 2014-09 requires the disclosure of sufficient information to enable users of CSC’s financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts. CSC will also be required to disclose information regarding significant judgments and changes in judgments, and assets recognized from costs incurred to obtain or fulfill a contract. Early adoption is not allowed. ASU 2014-09 provides two methods of retrospective application. The first method would require CSC to apply ASU 2014-09 to each prior reporting period presented. The second method would require CSC to retrospectively apply with the cumulative effect of initially applying ASU 2014-09 recognized at the date of initial application. ASU 2014-09 will be effective for CSC beginning in fiscal 2018. CSC is currently evaluating the impact that the adoption of ASU 2014-09 may have on CSC’s Consolidated Condensed Financial Statements.

In April 2014, the FASB issued ASU No. 2014-08, “Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity” (ASU 2014-08), which changes the requirements for reporting discontinued operations in Subtopic 205-20 “Presentation of Financial Statements - Discontinued Operations.” ASU 2014-08 changes the definition of discontinued operations by limiting discontinued operations reporting to disposals that represent strategic shifts that have (or will have) a major effect on an entity’s operations and financial results. Under current GAAP, many disposals, some of which may be routine in nature and not representative of a substantive change in an entity’s strategy, are reported in discontinued operations. ASU 2014-08 requires expanded disclosures for discontinued operations designed to provide users of financial statements with more information about the assets, liabilities, revenues, expenses and cash flows related to discontinued operations. ASU 2014-08 also requires an entity to disclose the pretax profit or loss of an individually significant component of an entity that does not qualify for discontinued operations reporting. The amendments in ASU 2014-08 are effective prospectively for fiscal years, and interim periods within those years, beginning after December 15, 2014, which for CSC is beginning of fiscal 2016. Early adoption is permitted, but only for disposals (or classifications as held for sale) that have not been reported in financial statements previously issued or available for issuance. Adoption of this ASU is not expected to have a material effect on the Company's financial position.

In January 2014, the FASB issued ASU No. 2014-05, "Service Concession Arrangements (Topic 853) (a consensus of the FASB Emerging Issues Task Force)” (ASU 2014-05). ASU 2014-05 provides guidance on the accounting for service concession arrangements, which are arrangements between a public-sector entity grantor and an operating entity under which the operating entity operates the grantor’s infrastructure (e.g. airports, roads, or bridges). The operating entity also may provide the construction, upgrading, or maintenance services of the grantor’s infrastructure. ASU 2014-05 specifies that an operating entity should not account for a service concession arrangement that is within the scope of this ASU as a lease in accordance with Topic 840, "Leases." ASU 2014-05 also specifies that the infrastructure used in a service concession arrangement should not be recognized as property, plant, and equipment of the operating entity. The amendments in this ASU are effective for fiscal years, and interim periods within those years, beginning after December 15, 2014. ASU 2014-05 will be effective for CSC beginning in fiscal 2016. CSC believes that the adoption of ASU 2014-05 will not have a material effect on CSC's Consolidated Condensed Financial Statements.