Dell 1998 Annual Report Download - page 27

Income Taxes -- The provision for income taxes is based on income before taxes
as reported in the accompanying consolidated statement of income. Deferred tax
assets and liabilities are determined based on the difference between the
financial statement and tax basis of assets and liabilities using enacted tax
rates in effect for the year in which the differences are expected to reverse.
Earnings Per Common Share -- Basic earnings per share is based on the weighted
effect of all common shares issued and outstanding, and is calculated by
dividing net income by the weighted average shares outstanding during the
period. Diluted earnings per share is calculated by dividing net income by the
weighted average number of common shares used in the basic earnings per share
calculation plus the number of common shares that would be issued assuming
conversion of
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all potentially dilutive common shares outstanding. The following table sets
forth the computation of basic and diluted earnings per share for each of the
past three fiscal years:
FISCAL YEAR ENDED
---------------------------------------
JANUARY 29, FEBRUARY 1, FEBRUARY 2,
1999 1998 1997
----------- ----------- -----------
(IN MILLIONS, EXCEPT PER SHARE DATA)
Net income................................................ $1,460 $ 944 $ 518
Weighted average shares outstanding:
Basic................................................... 2,531 2,631 2,838
Employee stock options and other........................ 241 321 288
------ ------ ------
Diluted................................................. 2,772 2,952 3,126
====== ====== ======
Earnings per common share(a):
Basic................................................... $ 0.58 $ 0.36 $ 0.18
Diluted................................................. $ 0.53 $ 0.32 $ 0.17
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(a) Includes extraordinary loss of $0.01 basic per common share for fiscal year
1997.
Comprehensive Income -- The Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 130, "Reporting Comprehensive Income," in the fiscal year
ended January 29, 1999. The Company's comprehensive income is comprised of net
income, foreign currency translation adjustments and unrealized gains and losses
on marketable securities held as available-for-sale investments. Comprehensive
income of $1,459 million, $923 million and $517 million, respectively, for
fiscal years 1999, 1998 and 1997, was not materially different from reported net
income.
Segment Information -- The Company adopted SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information," in the fiscal year ended
January 29, 1999. SFAS No. 131 supersedes SFAS No. 14, "Financial Reporting for
Segments of a Business Enterprise," replacing the "industry segment" approach
with the "management" approach. The management approach designates the internal
organization that is used by management for making operating decisions and
assessing performance as the source of the Company's reportable segments. SFAS
No. 131 also requires disclosures about products and services, geographic areas
and major customers. The adoption of SFAS No. 131 did not affect the Company's
results of operations or financial position, but did affect the disclosure of
segment information as illustrated in Note 11.
Recently Issued Accounting Pronouncement -- In June 1998, the Financial
Accounting Standards Board ("FASB") issued SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities," which establishes accounting and
reporting standards for derivative instruments and hedging activities. SFAS No.
133 requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those instruments
at fair value. SFAS No. 133 is effective for all fiscal quarters of fiscal years
beginning after June 15, 1999. The Company is assessing the impact of SFAS No.
133 on its consolidated financial statements.
Reclassifications -- Certain prior year amounts have been reclassified to
conform to the fiscal year 1999 presentation.
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NOTE 2 -- FINANCIAL INSTRUMENTS
DISCLOSURES ABOUT FAIR VALUES OF FINANCIAL INSTRUMENTS