Dell 2009 Annual Report Download - page 48

Table of Contents
• our cost cutting measures;
• our ability to effectively manage periodic product and services transitions;
• our ability to effectively manage the growth of our distribution capabilities and add to our product and services offerings;
• our ability to achieve favorable pricing from our vendors;
• our reliance on third-party suppliers for product components, including reliance on several single-sourced or limited-sourced
suppliers;
• disruptions in component or product availability;
• successful implementation of our acquisition strategy;
• our ability to generate substantial non-U.S. net revenue;
• our product, customer, and geographic sales mix, and seasonal sales trends;
• our ability to access the capital markets;
• loss of government contracts;
• customer terminations of or pricing changes in services contracts, or our failure to perform as we anticipate at the time we enter into
services contracts;
• our ability to hedge effectively our exposure to fluctuations in foreign currency exchange rates and interest rates;
• counterparty default;
• unfavorable results of legal proceedings;
• our ability to obtain licenses to intellectual property developed by others on commercially reasonable and competitive terms;
• expiration of tax holidays or favorable tax rate structures, or unfavorable outcomes in tax audits and other compliance and matters;
• our ability to maintain strong internal controls;
• changing environmental and safety laws;
• the effect of armed hostilities, terrorism, natural disasters, and public health issues;
• information technology and manufacturing infrastructure disruptions or breaches of data security; and
• our ability to attract, retain, and motivate key personnel.
For a discussion of these risk factors affecting our business and prospects, see "Part I — Item 1A — Risk Factors."
Critical Accounting Policies
We prepare our financial statements in conformity with accounting principles generally accepted in the United States of America
("GAAP"). The preparation of financial statements in accordance with GAAP requires certain estimates, assumptions, and judgments to
be made that may affect our Consolidated Statements of Financial Position and Consolidated Statement of Income. We believe our most
critical accounting policies relate to revenue recognition, business combinations, warranty accruals, income taxes, and loss contingencies.
We have discussed the development, selection, and disclosure of our critical accounting policies with the Audit Committee of our Board
of Directors. These critical accounting policies and our other accounting policies are also described in Note 1 of Notes to Consolidated
Financial Statements included in "Part II — Item 8 — Financial Statements and Supplementary Data."
Revenue Recognition and Related Allowances — We frequently enter into sales arrangements with customers that contain multiple
elements or deliverables such as hardware, software, peripherals, and services. Judgments and estimates are necessary to ensure
compliance with GAAP. These judgments relate to the allocation of the proceeds received from an arrangement to the multiple elements,
the determination of whether any undelivered elements are essential to the functionality of the delivered elements, and the appropriate
timing of revenue recognition. We offer extended warranty and service contracts to customers that extend and/or enhance the technical
support, parts, and labor coverage offered as part of the base warranty included with the product. Revenue from extended warranty and
service contracts, for which we are 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, for which we
are not obligated to perform, is recognized on a net basis at the time of sale, as we do not meet the criteria for gross recognition.
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