HP 2011 Annual Report Download - page 123
Download and view the complete annual report
Please find page 123 of the 2011 HP annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.![](/annual_reports_html/HewlettPackard-2011-Annual-Report-65b2d0b/bg_123.png)
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Note 11: Financing Receivables and Operating Leases (Continued)
The credit risk profile of the gross financing receivables, based on internally assigned ratings, was
as follows for the following fiscal years ended October 31:
Risk Rating 2011 2010
In millions
Low ........................................................... $4,261 $3,793
Moderate ........................................................ 2,989 2,829
High ........................................................... 57 88
Total ........................................................... $7,307 $6,710
Accounts rated low risk typically have the equivalent of a Standard & Poor’s rating of BBB or
higher, while accounts rated moderate risk would generally be the equivalent of BB+ or lower. HP
closely monitors accounts rated high risk and based upon impairment analysis, specific reserves may
have been established against a portion of these leases.
The allowance for doubtful accounts balance is comprised of a general reserve, which is
determined based on a percentage of the financing receivables balance, and a specific reserve, which is
established for certain leases with identified exposures, such as customer default, bankruptcy or other
events, that make it unlikely that HP will recover its investment in the lease. The general reserve
percentages are maintained on a regional basis and are based on several factors, which include
consideration of historical credit losses and portfolio delinquencies, trends in the overall weighted-
average risk rating of the portfolio, and information derived from competitive benchmarking.
The allowance for doubtful accounts and the related financing receivables were as follows for the
following fiscal years ended October 31:
Allowance for doubtful accounts 2011
In millions
Balance, beginning of period .............................................. $140
Additions to allowance ................................................... 58
Deductions, net of recoveries .............................................. (68)
Balance, end of period ................................................... $130
2011 2010
In millions
Allowance for financing receivables individually evaluated for loss ............... $ 35 $ 53
Allowance for financing receivables collectively evaluated for loss ............... 95 87
Total ......................................................... $ 130 $ 140
Gross financing receivables individually evaluated for loss ..................... $ 157 $ 271
Gross financing receivables collectively evaluated for loss ..................... 7,150 6,439
Total ......................................................... $7,307 $6,710
Accounts are generally put on non-accrual status (cessation of interest accrual) when they reach
90 days past due. In certain circumstances, such as when the delinquency is deemed to be of an
115