Dell 2003 Annual Report Download - page 40
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Table of Contents
Warranty — Dell records warranty liabilities at the time of sale for the estimated costs that may be incurred under its basic limited warranty. The specific
warranty terms and conditions vary depending upon the product sold and country in which Dell does business, but generally includes technical support, repair
parts, labor, and a period ranging from 90 days to three years. Factors that affect Dell's warranty liability include the number of installed units currently under
warranty, historical and anticipated rates of warranty claims on those units, and cost per claim to satisfy Dell's warranty obligation. Each quarter, Dell
reevaluates its estimates to assess the adequacy of its recorded warranty liabilities and adjusts the amounts as necessary.
Shipping Costs — Dell's shipping and handling costs are included in cost of sales in the accompanying consolidated statement of income for all periods
presented.
Advertising Costs — Advertising costs are charged to expense as incurred. Advertising expenses for fiscal 2004, 2003, and 2002, were $473 million,
$426 million, and $361 million, respectively.
Website Development Costs — Dell expenses the costs of maintenance and minor enhancements to the features and functionality of its websites.
Special Charges — During the second quarter of fiscal 2002, Dell recorded a special charge of $482 million in operating expenses to reduce its workforce and
exit certain activities in order to further align its cost structure with ongoing economic and industry conditions. As part of this undertaking, Dell eliminated
approximately 4,000 employee positions worldwide from various business functions and job classes. As of January 30, 2004 and January 31, 2003,
substantially all accrued costs related to the $482 million in special charges had been paid. In fiscal 2002, Dell also recorded a $260 million impairment
charge in the second quarter for other-than-temporary declines in fair value of Dell's venture investments due to market conditions as well as the investees'
inability to execute their business plans.
Income Taxes — Deferred tax assets and liabilities are recorded based on the difference between the financial statement and tax basis of assets and liabilities
using enacted tax rates in effect for the year in which the differences are expected to reverse.
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