Dell 2011 Annual Report Download - page 48

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Table of Contents
$1.3 billion, respectively.
We maintain an allowance to cover expected financing receivable credit losses and evaluate credit loss expectations based on our total portfolio. For Fiscal
2012, Fiscal 2011, and Fiscal 2010, the principal charge-off rate for our total portfolio was 4.6%, 7.5%, and 8.0%, respectively. The charge-off rate for Fiscal
2011 is annualized for a portfolio of receivables that consisted of revolving Dell U.S. customer account balances that was purchased during the third quarter
of Fiscal 2011. The credit quality mix of our financing receivables has improved in recent years due to our underwriting actions and as the mix of high quality
commercial accounts in our portfolio has increased. The allowance for losses is determined based on various factors, including historical and anticipated
experience, past due receivables, receivable type, and customer risk profile. At February 3, 2012, and January 28, 2011, the allowance for financing receivable
losses was $202 million and $241 million, respectively. In general, the loss rates on our financing receivables for Fiscal 2012 have continued to improve over
the prior year. However, we do not expect this improvement to continue as loss rates have stabilized. We continue to monitor broader economic indicators and
their potential impact on future loss performance. We have an extensive process to manage our exposure to customer risk, including active management of
credit lines and our collection activities. Based on our assessment of the customer financing receivables, we believe that we are adequately reserved.
See Note 4 of the Notes to Consolidated Financial Statements included in “Part II — Item 8 — Financial Statements and Supplementary Data” for additional
information about our financing receivables and the associated allowance.
OFF-BALANCE SHEET ARRANGEMENTS
With the consolidation of our previously nonconsolidated special purpose entities, we no longer have off-balance sheet financing arrangements.
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