HP 2009 Annual Report Download - page 102

HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Note 1: Summary of Significant Accounting Policies (Continued)
In December 2008, the FASB issued a new accounting standard that requires additional disclosures
about assets held in an employer’s defined benefit pension or other postretirement plan. HP will adopt
this new accounting standard in the first quarter of fiscal 2010. HP will present the required disclosures
in the prescribed format on a prospective basis upon adoption. This new standard will only affect the
notes to HP’s consolidated financial statements.
In June 2009, the FASB issued a new accounting standard related to transfers of financial assets. It
amends previous guidance to remove the concept of a qualifying special-purpose entity and its
exemption from consolidation in the transferor’s financial statements. This new standard also
establishes conditions for reporting a transfer of a portion of a financial asset as a sale, modifies the
financial-asset derecognition criteria, revises how interests retained by the transferor in a sale of
financial assets are initially measured, removes the guaranteed mortgage securitization
recharacterization provisions, and requires additional disclosures. HP will adopt this new accounting
standard in the first quarter of fiscal 2011. HP does not expect the adoption of this standard will have a
material effect on its consolidated financial statements.
In June 2009, the FASB issued a new accounting standard related to the consolidation of variable
interest entities. It eliminates the quantitative approach previously required for determining the primary
beneficiary of a variable interest entity and requires ongoing qualitative reassessments of whether an
enterprise is the primary beneficiary of a variable interest entity. This new standard also requires
additional disclosures about an enterprise’s involvement in variable interest entities. HP will adopt this
new accounting standard in the first quarter of fiscal 2011. HP is currently evaluating the impact the
adoption of this standard will have on its consolidated financial statements.
During the fourth quarter of fiscal 2009, HP adopted the FASB Accounting Standards Codification
and the Hierarchy of Generally Accepted Accounting Principles which only affected the specific
references to GAAP literature in the notes to HP’s consolidated financial statements.
In October 2009, the FASB issued ASU 2009-13. The new standard changes the requirements for
establishing separate units of accounting in a multiple element arrangement and requires the allocation
of arrangement consideration to each deliverable to be based on the relative selling price. Concurrently
to issuing ASU 2009-13, the FASB also issued ASU 2009-14. ASU 2009-14 excludes software that is
contained on a tangible product from the scope of software revenue guidance if the software is
essential to the tangible product’s functionality.
A further discussion of the financial impact of ASU 2009-13 and ASU 2009-14 appears under
‘‘Revenue Recognition’’ above.
Note 2: Stock-Based Compensation
HP’s stock-based compensation plans include incentive compensation plans and an employee stock
purchase plan (‘‘ESPP’’).
Stock-based Compensation Expense and the Related Income Tax Benefits
Total stock-based compensation expense before income taxes for fiscal 2009, 2008 and 2007 was
$635 million, $606 million and $629 million, respectively. The resulting income tax benefit for fiscal
2009, 2008 and 2007 was $199 million, $178 million and $182 million, respectively.
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