Dell 2010 Annual Report Download - page 65

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, storage, and services. 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. References to Commercial business refer to Large
Enterprise, Public, and Small and Medium Business.
Fiscal Year — Dell's fiscal year is the 52 or 53 week period ending on the Friday nearest January 31. The fiscal years ended January 28,
2011, January 29, 2010, and January 30, 2009, 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 reported at 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 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 reviews its investment portfolio quarterly to determine if any investment is other than temporarily impaired. 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"). However, if Dell
does not expect to sell a debt security, it still evaluates expected cash flows to be received and determines if a credit-related loss exists. In
the event of a credit-related loss, only the amount of impairment associated with the credit-related loss is recognized in earnings.
Amounts relating to factors other than credit-related losses are 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. Based on how Dell assesses risk and determines the appropriate allowance levels, Dell has two portfolio segments, (1) fixed-
term leases and loans and (2) revolving loans. Portfolio segments are further segregated into classes based on operating segment and
whether the receivable was owned by Dell since its inception or was purchased subsequent to its inception. Financing receivables are
presented net of the allowance for losses. See Note 4 of Notes to Consolidated Financial Statements for additional information.
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