Dell 2004 Annual Report Download - page 28

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Table of Contents
U.S. continues to expand and contribute an increasing portion of Dell's consolidated operating profits.
Off-Balance Sheet Arrangements
Consolidation of Leasing Affiliate — Dell is currently a partner in DFS, a joint venture with CIT. The joint venture allows Dell to provide its
customers with various financing alternatives while CIT generally provides the financing between DFS and the customer for certain
transactions. Dell began consolidating DFS's financial results at the beginning of the third quarter of fiscal 2004 due to the adoption of Financial
Accounting Standards Board ("FASB") Interpretation No. 46R ("FIN 46R"). See Note 6 of "Notes to Consolidated Financial Statements"
included in "Item 8 — Financial Statements and Supplementary Data."
Securitized Lending Transactions — During the third quarter of fiscal 2005, Dell and CIT executed an agreement that extended the term of the
joint venture to January 29, 2010 and modified certain terms of the relationship. Prior to the execution of that agreement, CIT provided all of the
financing for transactions between DFS and the customer. The extension agreement gives Dell the right, but not the obligation, to participate in
such financings. During the fourth quarter of fiscal 2005, Dell began financing certain loan and lease transactions through securitized lending
arrangements. Specifically, Dell began selling certain loan and lease finance receivables to an unconsolidated qualifying special purpose entity
that is wholly owned by Dell. The qualifying special purpose entity is a separate legal entity with assets and liabilities separate from those of
Dell. The qualifying special purpose entity has entered into a financing arrangement with a multiseller conduit that in turn issues asset-backed
debt securities to the capital markets. The sale of these loan and lease financing receivables did not have a material impact on Dell's
consolidated results of operations, financial position, or cash flows for fiscal 2005. Dell expects that its participation in securitized lending
transactions may increase in future periods.
Master Lease Facilities — Dell historically maintained master lease facilities which provided the company with the ability to lease certain real
property, buildings, and equipment to be constructed or acquired. These leases were accounted for as operating leases by Dell. During fiscal
2004, Dell paid $636 million to purchase all of the assets covered by its master lease facilities. Accordingly, the assets formerly covered by
these facilities are included in Dell's consolidated statement of financial position and Dell has no remaining lease commitments under these
master lease facilities. 25