a. Xerox reports several sources of income. How should revenue be recognized for each of these business activities? Explain.

b. Compute the relative size of Sales revenue (total) and of revenue from Service, outsourcing and rentals. Hint: Scale each type of revenue by Total revenue. Which type of revenue grew more in 2010?

c. Xerox reports research, development and engineering expenses (R&D) each year. Compare R&D spending over the three years. Hint: Scale R&D by Total revenue each year. What might explain the change in 2010?

d. Xerox reports restructuring costs each year. (1) Describe the three typical categories of restructuring costs and the accounting for each. (2) How do you recommend treating these costs for analysis purposes? (3) Should regular recurring restructuring costs be treated differently then isolated occurrences of such costs for analysis purposes/ (4) What does the $(8) expense in 2009 imply about one or more previous years accruals?

e. Xerox reports $3899 million in expenses in 2010 labeled as Other expenses, net. How can a company use such an account to potentially obscure its actual financial performance?

Year Ended December 31 (in millions)

Year 1--2010

Revenue

Equipment Sales--3857

Supplies, paper and other--3377

Sales--7234

Service, outsourcing and rentals--13,739

Finance income--660

Total revenues--21633

Costs and Expenses

Cost of sales--4741

Cost of service, outsourcing and rentals--9195

Equipment financing interest--246

Research, development and engineering expenses--781

Selling, administrative and general expenses--4594

Restructuring and asset impairment charges--483

Acquisition-related costs--77

Amortization of intangible assets--312

Other expenses net--389

Total Costs and Expenses--20,818

Income (Loss) before Income Taxes and Equity Income--815

Income tax expense (benefit)--256

Equity in net income of unconsolidated affiliates--78

Net income--637

Less: Net income Attibutable to noncontrolling interests--31

Net income Attributable to Xerox--606

Year 2--2009

Revenue

Equipment Sales--3550

Supplies, paper and other--3096

Sales--6646

Service, outsourcing and rentals--7820

Finance income--713

Total revenues--15179

Costs and Expenses

Cost of sales--4395

Cost of service, outsourcing and rentals--4488

Equipment financing interest--271

Research, development and engineering expenses--840

Selling, administrative and general expenses--4149

Restructuring and asset impairment charges--(8)

Acquisition-related costs--72

Amortization of intangible assets--60

Other expenses net--285

Total Costs and Expenses--14552

Income (Loss) before Income Taxes and Equity Income--627

Income tax expense (benefit)--152

Equity in net income of unconsolidated affiliates--41

Net income--516

Less: Net income Attibutable to noncontrolling interests--31

Net income Attributable to Xerox--485

Year 3--2008

Revenue

Equipment Sales--4679

Supplies, paper and other--3646

Sales--8325

Service, outsourcing and rentals--8485

Finance income--798

Total revenues--17608

Costs and Expenses

Cost of sales--5519

Cost of service, outsourcing and rentals--4929

Equipment financing interest--305

Research, development and engineering expenses--884

Selling, administrative and general expenses--4534

Restructuring and asset impairment charges--429

Acquisition-related costs--0

Amortization of intangible assets--54

Other expenses net--1033

Total Costs and Expenses--17687

Income (Loss) before Income Taxes and Equity Income--(79)

Income tax expense (benefit)--(231)

Equity in net income of unconsolidated affiliates--113

Net income--265

Less: Net income Attibutable to noncontrolling interests--35

Net income Attributable to Xerox--230