Dell 2006 Annual Report Download - page 59
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Table of Contents
Warranty — We record warranty liabilities at the time of sale for the estimated costs that may be incurred under the terms of
the limited warranty. The specific warranty terms and conditions vary depending upon the product sold and country in which
we do business, but generally include technical support, parts, and labor over a period ranging from one to three years.
Factors that affect our warranty liability include the number of installed units currently under warranty, historical and
anticipated rates of warranty claims on those units, and cost per claim to satisfy our warranty obligation. The anticipated rate
of warranty claims is the primary factor impacting our estimated warranty obligation. The other factors are less significant due
to the fact that the average remaining aggregate warranty period of the covered installed base is approximately 20 months,
repair parts are generally already in stock or available at pre-determined prices, and labor rates are generally arranged at
pre-established amounts with service providers. Warranty claims are reasonably predictable based on historical experience
of failure rates. If actual results differ from our estimates, we revise our estimated warranty liability to reflect such changes.
Each quarter, we reevaluate our estimates to assess the adequacy of the recorded warranty liabilities and adjust the
amounts as necessary.
Income Taxes — We calculate a provision for income taxes using the asset and liability method, under which deferred tax
assets and liabilities are recognized by identifying the temporary differences arising from the different treatment of items for
tax and accounting purposes. In determining the future tax consequences of events that have been recognized in our
financial statements or tax returns, judgment is required. Differences between the anticipated and actual outcomes of these
future tax consequences could have a material impact on our consolidated results of operations or financial position.
Recently Issued Accounting Pronouncements
See Note 1 of Notes to Consolidated Financial Statements included in "Part II — Item 8 — Financial Statements and
Supplementary Data" for a description of recently issued accounting pronouncements, including the expected dates of
adoption and estimated effects on our results of operations, financial position, and cash flows.
ITEM 7A — QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Response to this item is included in "Part II — Item 7 — Management's Discussion and Analysis of Financial Condition and
Results of Operations — Market Risk."
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