Dell 2009 Annual Report Download - page 59

Table of Contents
DELL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
are supported by both Dell's historical experience and anticipated trends relative to the particular receivable pool. See Note 4 of Notes to
Consolidated Financial Statements for additional information.
Allowance for Doubtful Accounts — Dell recognizes an allowance for losses on accounts receivable in an amount equal to the estimated
probable losses net of recoveries. The allowance is based on an analysis of historical bad debt experience, current receivables aging,
expected future write-offs, as well as an assessment of specific identifiable customer accounts considered at risk or uncollectible. The
expense associated with the allowance for doubtful accounts is recognized as selling, general, and administrative expense.
Allowance for Financing Receivables Losses — Dell recognizes an allowance for losses on financing receivables in an amount equal to
the probable losses net of recoveries. The allowance for losses is determined based on a variety of factors, including historical and
anticipated experience, past due receivables, receivable type, and customer risk profile. Financing receivables are charged to the
allowance at the earlier of when an account is deemed to be uncollectible or when the account is 180 days delinquent. Recoveries on
receivables previously charged off as uncollectible are recorded to the allowance for losses on financing receivables. The expense
associated with the allowance for financing receivables losses is recognized as cost of net revenue. See Note 4 of Notes to Consolidated
Financial Statements for additional information.
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 ten to thirty 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. Dell 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.
Impairment of Long-Lived Assets — Dell reviews long-lived assets for impairment when circumstances indicate the carrying amount of
an asset may not be recoverable based on the undiscounted future cash flows of the asset. If the carrying amount of the asset is
determined not to be recoverable, a write-down to fair value is recorded. Fair values are determined based on quoted market values,
discounted cash flows, or external appraisals, as applicable. Dell reviews long-lived assets for impairment at the individual asset or the
asset group level for which the lowest level of independent cash flows can be identified.
Goodwill and Intangible Assets — Identifiable intangible assets with finite lives are amortized over their estimated useful lives. They are
generally amortized on a non-straight line approach based on the associated projected cash flows in order to match the amortization
pattern to the pattern in which the economic benefits of the assets are expected to be consumed. They are reviewed for impairment if
indicators of potential impairment exist. Goodwill and indefinite-lived intangible assets are tested for impairment on an annual basis in
the second fiscal quarter, or sooner if an indicator of impairment occurs.
Foreign Currency Translation — The majority of Dell's international sales are made by international subsidiaries, most of which have the
U.S. dollar as their functional currency. Dell's subsidiaries that do not have the U.S. dollar as their functional currency translate assets and
liabilities at current rates of exchange in effect at the balance sheet date. Revenue and expenses from these international subsidiaries are
translated using the monthly average exchange rates in effect for the period in which the items occur. Cumulative foreign currency
translation adjustments totaled a $40 million loss, $11 million loss, and $16 million loss at January 29, 2010, January 30, 2009, and
February 1, 2008, respectively, and are included as a component of accumulated other comprehensive income (loss) in stockholders'
equity.
Local currency transactions of international subsidiaries that have the U.S. dollar as the functional currency are remeasured into U.S.
dollars using current rates of exchange for monetary assets and liabilities and historical rates
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