Dell 2009 Annual Report Download - page 58

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 (both individually and together with its consolidated subsidiaries, "Dell"),
offers a broad range of technology product categories, including mobility products, desktop PCs, software and peripherals, servers and
networking products, services, and storage. Dell sells its products and services directly to customers through dedicated sales
representatives, telephone-based sales, and online at www.dell.com, and through a variety of indirect sales channels. Dell's business
segments are Large Enterprise, Public, Small and Medium Business and Consumer.
Fiscal Year — Dell's fiscal year is the 52 or 53 week period ending on the Friday nearest January 31. The fiscal years ending January 29,
2010, January 30, 2009, and February 1, 2008, included 52 weeks.
Principles of Consolidation — The accompanying consolidated financial statements include the accounts of Dell Inc. and its wholly-
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.
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 due from banks, with original maturities of
three months or less at date of purchase, are carried at cost 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 are primarily in debt securities, which are classified as available-for-sale and are reported at fair value
(based primarily on quoted prices and market observable inputs) 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 interest and other,
net. An impairment loss will be recognized and will reduce an investment's carrying amount to its fair market value 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.
Dell determines an impairment is other than temporary when there is intent to sell the security, it is more likely than not that the security
will be required to be sold before recovery in value or it is not expected to recover its entire amortized cost basis ("credit related loss").
Credit related losses on debt securities will be considered an other-than-temporary impairment recognized in earnings, and any other
losses due to a decline in fair value relative to the amortized cost deemed not to be other-than-temporary will be recorded in other
comprehensive income. See Note 3 of Notes to the Consolidated Financial Statements for additional information.
Financing Receivables — Financing receivables consist of customer receivables, residual interest and retained interest in securitized
receivables. Customer receivables include revolving loans and fixed-term leases and loans resulting from the sale of Dell products and
services. Financing receivables are presented net of the allowance for losses. See Note 4 of Notes to Consolidated Financial Statements
for additional information.
Asset Securitization — Dell transfers certain financing receivables for fixed term leases and loans 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 leases and loans are recognized in the period the sale occurs, based upon the
relative fair value of the assets sold and the remaining retained interest. Retained interest is recognized at fair value with any changes in
fair value recorded in earnings. In estimating the value of retained interest, Dell makes a variety of financial assumptions, including pool
credit losses, payment rates, and discount rates. These assumptions
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