Dell 2009 Annual Report Download - page 76

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Table of Contents
DELL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table summarizes the key assumptions used to measure the fair value of the retained interest of the fixed term leases and
loans at time of transfer within the period and at January 29, 2010, the balance sheet date:
Weighted Average Key Assumptions
Monthly Payment Credit Discount
Rates Losses Rates Life
(lifetime) (annualized) (months)
Time of transfer valuation of retained interest 5% 1% 12% 20
Valuation of retained interest 8% 3% 12% 14
The impact of adverse changes to the key valuation assumptions to the fair value of retained interest at January 29, 2010 is shown in the
following table:
January 29, 2010
(in millions)
Adverse Change of:
Expected prepayment speed: 10% $ (0.1)
Expected prepayment speed: 20% $ (0.2)
Expected credit losses: 10% $ (1.1)
Expected credit losses: 20% $ (2.2)
Discount rate: 10% $ (1.7)
Discount rate: 20% $ (3.4)
The analysis above utilized 10% and 20% adverse variation in assumptions to assess the sensitivities in the fair value of the retained
interest. However, these changes generally cannot be extrapolated because the relationship between a change in one assumption to the
resulting change in fair value may not be linear. For the above sensitivity analyses, each key assumption was isolated and evaluated
separately. Each assumption was adjusted by 10% and 20% while holding the other key assumptions constant. Assumptions may be
interrelated, and changes to one assumption may impact others and the resulting fair value of the retained interest. For example, increases
in market interest rates may result in lower prepayments and increases in credit losses. The effect of multiple assumption changes were
not considered in the analysis.
During Fiscal 2010 and Fiscal 2009, $784 million and $1.4 billion, respectively, of customer receivables were funded via securitization
through nonconsolidated qualified special purpose entities. The principal balance of securitized receivables reported off-balance sheet as
of January 29, 2010, and January 30, 2009, were $774 million and $1.4 billion, respectively. Dell's risk of loss related to securitized
receivables is limited to the amount of its retained interest.
Lease and loan receivables transferred to the nonconsolidated qualified special purpose entities exceed the level of debt issued. As of
January 29, 2010, the nonconsolidated securitized receivables were $774 million, and the associated debt was $624 million. Upon
consolidation of these customer receivables and associated debt in the first quarter of Fiscal 2011 as previously discussed, Dell's retained
interest in securitized receivables of $151 million at January 29, 2010, will be eliminated.
Delinquency and charge-off statistics for securitized receivables held by nonconsolidated qualified special purpose entities are:
– As of January 29, 2010, and January 30, 2009, securitized financing receivables 60 days or more delinquent were $11 million and
$63 million, respectively. These amounts represent 1.5% and 4.6% of the ending securitized financing receivables balances for
the respective periods.
72