7. Consolidated financial statement details

The following tables provide details of selected items presented in the consolidated statements of operations and cash flows for the years ended December 31, 2011 and 2010, and the consolidated balance sheets as of December 31, 2011 and 2010.

Consolidated statements of operations

Selling, general and administrative expense:

SG&A expense includes bad debt expense of $6 and $8 in the years ended December 31, 2011 and 2010, respectively.

Research and development expense:


	2010
R&D expense	$	107
R&D costs incurred on behalf of others ^(a)		6

Total	$	113

(a)	Includes R&D costs charged to Nortel customers pursuant to contracts that provided for full recovery of the estimated costs of Nortel related development, material, engineering, installation and other applicable costs, which were accounted for as contract costs.

Due to the divestiture of all of Nortel's businesses, Nortel no longer invests in research and development. As a result, Nortel's R&D expense was nil in the year ended December 31, 2011 and is expected to be nil for the remainder of the Creditor Protection Proceedings.

Other operating expense (income) — net:


	2011			2010
Royalty license income - net	$	(2	)	$	(10	)
Litigation charges - net		(6	)		5
Billings under TSAs		(50	)		(269	)
Other - net		1			(7	)

Other operating income - net	$	(57	)	$	(281	)

Other income (expense) — net:


	2011			2010
Gain on sale and impairment of investments - net	$	1		$	7
Rental income		3			59
Currency exchange loss - net		(35	)		(6	)
Other - net		(14	)		(3	)

Other income (expense) - net	$	(45	)	$	57

Consolidated balance sheets

Cash and cash equivalents:


	2011		2010
Cash on hand and balances with banks	$	241	$	341
Cash equivalents		510		466

Cash and cash equivalents at end of year	$	751	$	807

Accounts receivable — net:


	2011			2010
Trade and other receivables ^(a)	$	193		$	272
Contracts in process		-			3

		193			275
Less: provisions for doubtful accounts		(19	)		(15	)

Accounts receivable - net	$	174		$	260

(a)	Includes $155 and $163 as of December 31, 2011 and 2010, respectively, related to net accounts receivable from subsidiaries accounted for under the cost method, where settlement will occur as part of a plan of reorganization under the Creditor Protection Proceedings.

Inventories — net:


	2011			2010
Gross inventories	$	1		$	15
Less: provisions for inventories		(1	)		(11	)

Inventories - net	$	-		$	4

Other current assets:


	2011		2010
Prepaid expenses	$	16	$	25
Income taxes recoverable		26		38
Current investments		1		1
Other ^(a)		36		90

Other current assets	$	79	$	154

(a)	Includes certain receivables resulting from divestiture of businesses and TSAs.

Plant and equipment — net:


	2011			2010
Cost:
Buildings	$	1		$	34
Machinery and equipment		91			193
Assets under capital lease		-			3
Sale lease-back assets		-			1

		92			231

Less accumulated depreciation:
Buildings		(1	)		(26	)
Machinery and equipment		(91	)		(171	)
Assets under capital lease		-			(3	)
Sale lease-back assets		-			(1	)

		(92	)		(201	)

Plant and equipment - net	$	-		$	30

Other assets:


	2011		2010
Debt issuance costs	$	24	$	35
Financial assets		-		7
Other		28		23

Other assets	$	52	$	65

Other accrued liabilities:


	2011		2010
Outsourcing and selling, general and administrative related provisions	$	5	$	10
Customer deposits		-		6
Advance billings in excess of revenues recognized to date on contracts		-		6
Income taxes payable		2		16
Other		10		17

Other accrued liabilities	$	17	$	55

Other liabilities:


	2011		2010
Tax uncertainties	$	9	$	16
Other long-term provisions		8		15

Other liabilities	$	17	$	31

Consolidated statements of cash flows

Change in operating assets and liabilities — net:


	2011			2010
Accounts and other receivables - net	$	82		$	339
Inventories - net		-			36
Deferred costs		4			22
Income taxes		(5	)		(83	)
Accounts payable		(42	)		(63	)
Payroll, accrued and contractual liabilities		66			66
Deferred revenue		(9	)		3
Advance billings in excess of revenues recognized to date on contracts		(5	)		(78	)
Restructuring liabilities		-			(20	)
Other		95			(37	)

Change in operating assets and liabilities ^(a)	$	186		$	185

(a)	The changes in liability amounts noted above include obligations that are subject to compromise, consistent with their designation as of, and subsequent to, the Petition Date.

Interest, taxes and reorganization items paid (received):


	2011			2010
Cash interest paid	$	-		$	5
Cash taxes paid - net	$	10		$	49
Net receipts from reorganization items (note 5)	$	(4,511	)	$	(741	)

Enterprise-wide Segment Information

Product revenues

The following table sets forth external revenues by product for the years ended December 31:


	2011		2010
CDMA Solutions	$	4	$	38
GSM and UMTS solutions		10		173
Circuit and packet voice solutions		3		166
Optical networking solutions and carrier ethernet		-		147
Data networking and security solutions		10		94
Other		-		2

Total revenues	$	27	$	620

Geographic information:

The following table sets forth external consolidated revenues by geographic region based on the location of the customer for the years ended December 31:


	2011		2010
United States ^(a)	$	1	$	342
EMEA ^(b)		-		3
Canada		-		45
Asia ^(c)		25		181
CALA		1		49

Total revenues	$	27	$	620

(a)	2010 amount reflects revenues up to September 30, 2010, being the period prior to deconsolidation of the U.S. Subsidiaries.

(b)	Excludes amounts related to EMEA Subsidiaries of $222 for the year ended December 31, 2010.

(c)	Excludes amounts related to EMEA Subsidiaries of $18 for the year ended December 31, 2010.

Nortel had three customers that generated revenues of approximately 43% of total consolidated revenues for the year ended December 31, 2011. Nortel had two customers that generated revenues of approximately 27% of total consolidated revenues for the year ended December 31, 2010.

Long-lived assets:

The following table sets forth long-lived assets representing plant and equipment - net, by geographic region as of December 31:


	2010
United States	$	-
Canada		23
Asia		6
CALA		1

Total	$	30