Dell 2008 Annual Report Download - page 61

Table of Contents
DELL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
February 2, 2007, respectively, and are included as a component of accumulated other comprehensive income (loss) in stockholders' equity.
Local currency transactions of international subsidiaries that have the U.S. dollar as the functional currency are remeasured into U.S. dollars using
current rates of exchange for monetary assets and liabilities and historical rates of exchange for nonmonetary assets and liabilities. Gains and losses
from remeasurement of monetary assets and liabilities are included in investment and other income, net. See Note 12 of Notes to Consolidated
Financial Statements for additional information.
Hedging Instruments — Dell uses derivative financial instruments, primarily forwards, options, and swaps to hedge certain foreign currency and
interest rate exposures. Dell also uses other derivative instruments not designated as hedges such as forwards to hedge foreign currency balance
sheet exposures. Dell does not use derivatives for speculative purposes.
Dell applies SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, ("SFAS 133") as amended, which establishes accounting
and reporting standards for derivative instruments and hedging activities. SFAS 133 requires Dell to recognize all derivatives as either assets or
liabilities in its Consolidated Statements of Financial Position and measure those instruments at fair value. See Note 2 of Notes to Consolidated
Financial Statements for a full description of Dell's derivative financial instrument activities and related accounting policies.
Treasury Stock — Dell accounts for treasury stock under the cost method and includes treasury stock as a component of stockholders' equity.
Revenue Recognition — Dell's revenue recognition policy is in accordance with the requirements of Staff Accounting Bulletin ("SAB") No. 104,
Revenue Recognition, Emerging Issues Task Force ("EITF") 00-21, Accounting for Revenue Arrangements with Multiple Deliverables, AICPA
Statement of Position ("SOP") No. 97-2, Software Revenue Recognition, EITF 01-09, Accounting for Consideration Given by a Vendor to a
Customer (Including a Reseller of the Vendor's Products) ("EITF 01-09") and other applicable revenue recognition guidance and interpretations. Net
revenues include sales of hardware, software and peripherals, and services (including extended service contracts and professional services). Dell
recognizes revenue for these products when it is realized or realizable and earned. Revenue is considered realized and earned when:
• persuasive evidence of an arrangement exists;
• delivery has occurred or services have been rendered;
• Dell's fee to its customer is fixed or determinable; and
• collection of the resulting receivable is reasonably assured.
Revenue from the sale of products are recognized when title and risk of loss passes to the customer. Delivery is considered complete when products
have been shipped to Dell's customer or services have been rendered, title and risk of loss has transferred to the customer, and customer acceptance
has been satisfied through obtaining acceptance from the customer, the acceptance provision lapses, or Dell has evidence that the acceptance
provisions have been satisfied.
Dell sells its products and services either separately or as part of a multiple-element arrangement. Dell allocates revenue from multiple-element
arrangements to the elements based on the relative fair value of each element, which is generally based on the relative sales price of each element
when sold separately. The allocation of fair value for a multiple-element arrangement involving software is based on vendor specific objective
evidence ("VSOE"), or in the absence of VSOE for delivered elements, the residual method. Under the residual method, Dell allocates the residual
amount of revenue from the arrangement to software licenses at the inception of the license term when VSOE for all undelivered elements, such as
Post Contract Customer Support ("PCS"), exists and all other revenue recognition criteria have been satisfied. In the absence of VSOE for
undelivered elements, revenue is deferred and subsequently recognized over the term of the arrangement. For sales of extended warranties with a
separate contract price, Dell defers revenue equal to the separately stated price. Revenue associated with undelivered elements is deferred and
recorded when delivery occurs or services are provided. Product revenue is recognized, net of an allowance for estimated returns, when both title
and risk of loss transfer to the customer, provided that no significant obligations remain. Revenue from extended warranty and service contracts, for
which Dell is obligated to perform, is recorded as deferred revenue and subsequently recognized over the term of the contract or when the service is
completed. Revenue from sales of third-party extended warranty and service contracts or other products or software PCS, for which Dell is not
obligated to perform, and for
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