Dell 2006 Annual Report Download - page 101

Table of Contents
DELL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Fiscal Year Ended
February 2, February 3, January 28,
2007 2006 2005
As As
Restated Restated
(in millions)
Warranty liability:
Warranty liability at beginning of year $ 951 $ 722 $ 633
Costs accrued for new warranty contracts and changes in estimates for pre-existing
warranties(b) 1,242 1,391 852
Service obligations honored(a) (1,235) (1,162) (763)
Warranty liability at end of year $ 958 $ 951 $ 722
Current portion $ 768 $ 714 $ 463
Non-current portion 190 237 259
Warranty liability at end of year $ 958 $ 951 $ 722
(a) Prior period amounts have been changed to reflect the current year presentation of service obligations honored. There is no impact to the
Consolidated Statements of Financial Position or Consolidated Statements of Income as a result of this change.
(b) Changes in cost estimates related to pre-existing warranties are aggregated with accruals for new warranty contracts. Dell's warranty liability
process does not differentiate between estimates made for pre-existing warranties and new warranty obligations.
On August 14, 2006, Dell announced a voluntary recall of approximately 4.2 million Dell-branded lithium-ion batteries with
cells manufactured by a supplier. From April 1, 2004, through July 18, 2006, Dell sold or provided these batteries individually
or as part of a service replacement with notebook computers. This recall has not had a material impact on Dell's results of
operations, financial position, or cash flows, as Dell was indemnified by the manufacturer of these batteries.
NOTE 9 — Commitments and Contingencies
Lease Commitments — Dell leases property and equipment, manufacturing facilities, and office space under non-cancelable
leases. Certain of these leases obligate Dell to pay taxes, maintenance, and repair costs. At February 2, 2007, future
minimum lease payments under these non-cancelable leases are as follows: $79 million in Fiscal 2008; $72 million in Fiscal
2009; $56 million in Fiscal 2010; $47 million in Fiscal 2011; $35 million in Fiscal 2012; and $161 million thereafter.
Rent expense under all leases totaled $78 million, $70 million, and $60 million for Fiscal 2007, 2006, and 2005, respectively.
DFS Purchase Commitment — Pursuant to the joint venture agreement between Dell and CIT, Dell has an obligation to
purchase CIT's 30% interest in DFS at the expiration of the joint venture on January 29, 2010, for a purchase price ranging
from approximately $100 million to $345 million. Dell currently expects that the purchase price will likely be towards the upper
end of the range. See Note 7 of Notes to Consolidated Financial Statements.
Restricted Cash — Pursuant to an agreement between DFS and CIT, Dell is required to maintain escrow cash accounts that
are held as recourse reserves for credit losses, performance fee deposits related to Dell's private label credit card, and
deferred servicing revenue. Restricted cash specific to the consolidation of DFS in the amount of $416 million and
$453 million is included in other current assets on Dell's Consolidated Statements of Financial Position at February 2, 2007
and February 3, 2006, respectively. 98