HP 2015 Annual Report Download - page 102

Table of Contents
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
HP determines stock-based compensation expense based on the measurement date fair value of the award. HP recognizes compensation cost only for
those awards expected to meet the service and performance vesting conditions on a straight-line basis over the requisite service period of the award. HP
determines compensation costs at the aggregate grant level for service-based awards and at the individual vesting tranche level for awards with performance
and/or market conditions. HP estimates the forfeiture rate based on its historical experience.
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HP has various defined benefit, other contributory and noncontributory retirement and post-retirement plans. HP generally amortizes unrecognized
actuarial gains and losses on a straight-line basis over the average remaining estimated service life of participants. In some cases, HP amortizes actuarial gains
and losses using the corridor approach. See Note 4 for a full description of these plans and the accounting and funding policies.
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Costs to produce advertising are expensed as incurred during production. Costs to communicate advertising are expensed when the advertising is first
run. Such costs totaled approximately $859 million in fiscal 2015, $834 million in fiscal 2014 and $867 million in fiscal 2013.
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HP records charges associated with management-approved restructuring plans to reorganize one or more of HP's business segments, to remove
duplicative headcount and infrastructure associated with business acquisitions or to simplify business processes and accelerate innovation. Restructuring
charges can include severance costs to eliminate a specified number of employees, infrastructure charges to vacate facilities and consolidate operations, and
contract cancellation costs. HP records restructuring charges based on estimated employee terminations and site closure and consolidation plans. HP accrues
for severance and other employee separation costs under these actions when it is probable that benefits will be paid and the amount is reasonably estimable.
The rates used in determining severance accruals are based on existing plans, historical experiences and negotiated settlements.
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HP recognizes deferred tax assets and liabilities for the expected tax consequences of temporary differences between the tax bases of assets and liabilities
and their reported amounts using enacted tax rates in effect for the year the differences are expected to reverse. HP records a valuation allowance to reduce the
deferred tax assets to the amount that is more likely than not to be realized.
HP records accruals for uncertain tax positions when HP believes that it is not more likely than not that the tax position will be sustained on examination
by the taxing authorities based on the technical merits of the position. HP makes adjustments to these accruals when facts and circumstances change, such as
the closing of a tax audit or the refinement of an estimate. The provision for income taxes includes the effects of adjustments for uncertain tax positions, as
well as any related interest and penalties.
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Source: HP INC, 10-K, December 16, 2015 Powered by Morningstar® Document Research℠
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