Dell 2001 Annual Report Download - page 39

Table of Contents
DELL COMPUTER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 — Description of Business and Summary of Significant Accounting Policies
Description of Business — Dell Computer Corporation, a Delaware corporation, and its consolidated subsidiaries (collectively referred to as the "Company")
designs, develops, manufactures, markets, services and supports a wide range of computer systems, including enterprise systems (includes servers,
workstations, storage products and networking products), notebook computers and desktop computer systems, and also markets software, peripherals and
service and support programs. The Company markets and sells its computer products and services under the DellTM brand name directly to its various
customer groups. These customer groups include large corporate, government, healthcare and education accounts, as well as small-to-medium businesses and
individuals.
Fiscal Year — The Company's fiscal year is the 52- or 53-week period ending on the Friday nearest January 31. Fiscal 2002 and 2000 included 52 weeks,
whereas fiscal 2001 included 53 weeks.
Principles of Consolidation — The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting
principles and include the accounts of the Company and its consolidated subsidiaries. All significant intercompany transactions and balances have been
eliminated.
Use of Estimates — The preparation of financial statements in accordance with generally accepted accounting principles 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 with original maturities of three months or less at date of purchase are carried at cost plus
accrued interest, which approximates fair value, and are considered to be cash equivalents. All other investments not considered to be cash equivalents are
separately categorized as investments.
Investments — The Company's debt securities and publicly traded equity securities are classified as available-for-sale and are reported at fair market value
(based on quoted market prices) using the specific identification method. All other investments are initially recorded at cost and subsequentially adjusted for
other-than-temporary declines in fair market value. Unrealized gains and losses are reported, net of taxes, as a component of stockholders' equity. Unrealized
losses are charged against income when a decline in the fair market value of an individual security is determined to be other-than-temporary. Realized gains
and losses on investments are included in investment and other income (loss), net when realized.
Inventories — Inventories are stated at the lower of cost or market with cost being determined on a first-in, first-out basis.
Property, Plant and Equipment — Property, plant and equipment are carried at depreciated cost. Depreciation is provided using the straight-line method over
the estimated economic lives of the assets, which range from 10 to 30 years for buildings and two to five years for all other assets. Leasehold improvements
are amortized over the shorter of five years or the lease term. Gains or losses related to retirements or disposition of fixed assets are recognized in the period
incurred. The Company performs reviews for the impairment of fixed assets whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. The Company capitalizes eligible internal-use software development costs incurred subsequent to the completion of the
preliminary project stage. Development costs are amortized over the shorter of the expected useful life of the software or five years.
36