Dell 2010 Annual Report Download - page 81

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Table of Contents
DELL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
receivables of $151 million at January 29, 2010, was eliminated. A $1 million decrease to beginning retained earnings for Fiscal
2011 was recorded as a cumulative effect adjustment due to adoption of the new accounting guidance.
• During Fiscal 2011, Fiscal 2010, and Fiscal 2009, $1.9 billion, $0.8 billion, and $1.4 billion of customer receivables, respectively,
were funded via securitization through SPEs. The programs are effective for 12 month periods and subject to an annual renewal
process. During Fiscal 2011, Dell expanded its revolving loan securitization program with a new program that increased debt
capacity levels. Dell also renewed and expanded one of its fixed-term lease and loan programs with increased debt capacity levels,
and replaced the other program during Fiscal 2011 with a new program.
• The structured financing debt related to the fixed-term lease and loan, and revolving loan securitization programs was $1 billion
and $788 million as of January 28, 2011, and January 29, 2010, respectively. This debt included $624 million at January 29, 2010,
held by nonconsolidated SPEs. The debt is collateralized solely by the financing receivables in the programs. The debt has a
variable interest rate and an average duration of 12 to 36 months based on the terms of the underlying financing receivables. The
maximum debt capacity related to the securitization programs was increased to $1.4 billion during Fiscal 2011. See Note 5 of the
Notes to the Consolidated Financial Statements for additional information regarding the structured financing debt.
• During Fiscal 2011, Dell entered into interest rate swap agreements to effectively convert a portion of the structured financing debt
from a floating rate to a fixed rate. The interest rate swaps qualified for hedge accounting treatment as cash flow hedges. See
Note 6 of Notes to Consolidated Financial Statements for additional information about interest rate swaps.
Retained Interest
Prior to adopting the new accounting guidance on VIEs and transfers of financial assets and extinguishment of financial liabilities, certain
transfers of financial assets to nonconsolidated qualified SPEs were accounted for as a sale. Upon the sale of the customer receivables to
the SPEs, Dell recognized a gain on the sale and retained a residual beneficial interest in the pool of assets sold, referred to as retained
interest. The retained interest represented Dell's right to receive collections for securitized assets that exceed the amount required to pay
interest, principal, and other fees and expenses.
Retained interest was stated at the present value of the estimated net beneficial cash flows after payment of all senior interests. Dell
valued the retained interest at the time of each receivable transfer and at the end of each reporting period. The fair value of the retained
interest was determined using a discounted cash flow model with various key assumptions, including payment rates, credit losses,
discount rates, and the remaining life of the receivables sold. These assumptions were supported by both Dell's historical experience and
anticipated trends relative to the particular receivable pool. The key valuation assumptions for retained interest could have been affected
by many factors, including repayment terms and the credit quality of receivables securitized.
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