Dell 2006 Annual Report Download - page 68

Table of Contents
DELL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 — Description of Business and Summary of Significant Accounting Policies
Description of Business — Dell Inc., a Delaware corporation, and its consolidated subsidiaries (collectively referred to as
"Dell") designs, develops, manufactures, markets, sells, and supports a wide range of computer systems and services that
are customized to customer requirements. Dell offers a broad range of product categories, including desktop computer
systems, servers and networking products, mobility products, software and peripherals, and enhanced services. Dell markets
and sells its products and services directly to its customers, which include large corporate, government, healthcare, and
education accounts, as well as small-to-medium businesses and individual customers.
Fiscal Year — Dell's fiscal year is the 52- or 53-week period ending on the Friday nearest January 31. The fiscal year ending
February 2, 2007 included 52 weeks. The fiscal year ending February 3, 2006 included 53 weeks, and the fiscal year ending
January 28, 2005 included 52 weeks.
Principles of Consolidation — The accompanying consolidated financial statements include the accounts of Dell and its
wholly-owned and controlled majority-owned subsidiaries and have been prepared in accordance with accounting principles
generally accepted in the United States of America ("GAAP"). All significant intercompany transactions and balances have
been eliminated.
Dell is currently a partner in Dell Financial Services L.P. ("DFS"), a joint venture with CIT Group, Inc. ("CIT"). The joint
venture allows Dell to provide its customers with various financing alternatives. Dell consolidates DFS' financial results in
accordance with Financial Accounting Standards Board ("FASB") Interpretation No. 46R ("FIN 46R") as Dell is the primary
beneficiary. See Note 7 of Notes to Consolidated Financial Statements.
Use of Estimates — The preparation of financial statements in accordance with GAAP requires the use of management's
estimates. These estimates are subjective in nature and involve judgments that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at fiscal year-end, and the reported amounts of revenues and
expenses during the fiscal year. Actual results could differ from those estimates.
Cash and Cash Equivalents — All highly liquid investments, including credit card receivables, with original maturities of three
months or less at date of purchase are carried at cost, which approximates fair value, and are considered to be cash
equivalents. All other investments not considered to be cash equivalents are separately categorized as investments.
Investments — Dell's investments in debt securities and publicly traded equity securities are classified as available-for-sale
and are reported at fair value (based on quoted market prices) using the specific identification method. Unrealized gains and
losses, net of taxes, are reported as a component of stockholders' equity. Realized gains and losses on investments are
included in investment and other income, net when realized. All other investments are initially recorded at cost, and any
impairment loss to reduce an investment's carrying amount to its fair market value is recognized in income when a decline in
the fair market value of an individual security below its cost or carrying value is determined to be other than temporary.
Financing Receivables — Financing receivables primarily consist of fixed-term loans and leases and revolving loans. Dell
sells certain finance receivables to unconsolidated qualifying special purpose entities in securitization transactions. These
receivables are removed from the Consolidated Statement of Financial Position at the time they are sold. Receivables are
considered sold when the receivables are transferred beyond the reach of Dell's creditors, the transferee has the right to
pledge or exchange the assets, and Dell has surrendered control over the rights and obligations of the receivables. Gains
and losses from the sale of fixed-term loans and leases and revolving loans are recognized in the period the sale occurs,
based upon the relative fair value of the assets sold and the remaining retained interests.
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