Dell 2002 Annual Report Download - page 42

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Table of Contents
other costs associated with an exit or disposal activity are to be expensed as incurred. SFAS No. 146 requires the liability to be measured at its fair value with
subsequent changes in fair value to be recognized each reporting period utilizing an interest allocation approach. The pronouncement is effective for exit or
disposal activities initiated after December 31, 2002 and is not expected to have a material impact on the Company's consolidated results of operations or
financial position.
In November 2002, the Emerging Issues Task Force ("EITF") reached a consensus regarding EITF Issue 00-21, Accounting for Revenue Arrangements with
Multiple Deliverables. The consensus addresses not only when and how an arrangement involving multiple deliverables should be divided into separate units
of accounting but also how the arrangement's consideration should be allocated among separate units. The pronouncement is effective for the Company
commencing with its fiscal 2004 and is not expected to have a material impact on its consolidated results of operations or financial position.
In November 2002, FASB issued Interpretation No. 45 ("FIN 45"), Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others." FIN 45 requires certain guarantees to be measured at fair value upon issuance and recorded as a liability. In addition,
FIN 45 expands current disclosure requirements regarding guarantees issued by an entity, including tabular presentation of the changes affecting an entity's
aggregate product warranty liability. The recognition and measurement requirements of the interpretation are effective prospectively for guarantees issued or
modified after December 31, 2002. The disclosure requirements are effective for the Company commencing in its annual financial statements for the fiscal
year ended January 31, 2003 (see Note 6 for product warranty information). The Company does not expect FIN 45 to have a material impact on its
consolidated results of operations or financial position.
In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based Compensation-Transition and Disclosure, an Amendment of FASB
Statement No. 123. SFAS No. 148 provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-
based employee compensation. In addition, SFAS No. 148 amends certain provisions of SFAS No. 123 to require that disclosure of the pro forma effect of
applying the fair value method of accounting for stock-based compensation be prominently displayed in an entity's accounting policy in annual and interim
financial statements. The Company is required to follow the prescribed format and provide the additional disclosures required by SFAS No. 148 in its annual
financial statements for the fiscal year ended January 31, 2003, and must also provide the disclosures in its quarterly reports containing condensed financial
statements for interim periods beginning with the quarterly period ending May 1, 2003. The Company does not expect SFAS No. 148 to have a material
impact on its consolidated results of operations or financial position.
In January 2003, the FASB issued FIN 46 Consolidation of Variable Interest Entities ("VIE"), which requires that if a company holds a controlling financial
interest in a VIE, the assets, liabilities and results of the VIE's activities should be consolidated in the entity's financial statements. As a result, the Company
will be required to consolidate its existing master lease facilities (see Note 6) effective during the third quarter of fiscal 2004. The Company expects to expend
approximately $640 million to acquire the assets held in master lease facilities. Dell is currently assessing the impact that FIN 46 may have on its accounting
for Dell Financial Services L.P. (see Note 7), but does not believe that consolidation will be required.
In January 2003, the EITF released Issue No. 02-16, Accounting by a Customer (including a Reseller) for Cash Consideration Received from a Vendor,
guiding the timing and manner in which customers should recognize consideration (e.g., rebates) received from vendors. Such consideration is generally
presumed to represent a reduction of a vendor's prices and should therefore be classified as a reduction of cost of revenue. The Company does not expect EITF
02-16 to have a material impact on its consolidated results of operations or financial position.
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