Dell 2007 Annual Report Download - page 55

Table of Contents
DELL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 — DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business — Dell Inc., a Delaware corporation (both individually and together with its consolidated subsidiaries, "Dell"),
offers a broad range of product categories, including desktop PCs, servers and networking products, storage, mobility products, software
and peripherals, and services. Dell sells its products and services directly to customers through dedicated sales representatives, telephone-
based sales, and online at www.dell.com, and through a variety of indirect sales channels. Dell's customers include large corporate,
government, healthcare, and education accounts, as well as small-to-medium businesses and individual consumers.
Fiscal Year — Dell's fiscal year is the 52- or 53-week period ending on the Friday nearest January 31. The fiscal years ending
February 1, 2008 and February 2, 2007 included 52 weeks, and the fiscal year ending February 3, 2006 included 53 weeks.
Principles of Consolidation — The accompanying consolidated financial statements include the accounts of Dell Inc. and its wholly-
owned subsidiaries and have been prepared in accordance with accounting principles generally accepted in the United States of America
("GAAP"). All significant intercompany transactions and balances have been eliminated.
Dell was formerly a partner in Dell Financial Services L.P. ("DFS"), a joint venture with CIT Group Inc. ("CIT"). Dell purchased the
remaining 30% interest in DFS from CIT effective December 31, 2007; therefore, DFS is a wholly-owned subsidiary at February 1, 2008.
DFS' financial results have previously been consolidated by Dell in accordance with Financial Accounting Standards Board ("FASB")
Interpretation No. 46R ("FIN 46R"), as Dell was the primary beneficiary. DFS allows Dell to provide its customers with various
financing alternatives. See Note 6 of Notes to Consolidated Financial Statements for additional information.
Use of Estimates — The preparation of financial statements in accordance with GAAP requires the use of management's estimates. These
estimates are subjective in nature and involve judgments that affect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at fiscal year-end, and the reported amounts of revenues and expenses during the fiscal year. Actual
results could differ from those estimates.
Cash and Cash Equivalents — All highly liquid investments, including credit card receivables, with original maturities of three months
or less at date of purchase are carried at cost, which approximates fair value, and are considered to be cash equivalents. All other
investments not considered to be cash equivalents are separately categorized as investments.
Investments — Dell's investments in debt securities and publicly traded equity securities are classified as available-for-sale and are
reported at fair value (based on quoted prices and market prices) using the specific identification method. Unrealized gains and losses, net
of taxes, are reported as a component of stockholders' equity. Realized gains and losses on investments are included in investment and
other income, net when realized. All other investments are initially recorded at cost. Any impairment loss to reduce an investment's
carrying amount to its fair market value is recognized in income when a decline in the fair market value of an individual security below
its cost or carrying value is determined to be other than temporary.
Financing Receivables — Financing receivables consist of customer receivables, residual interest and retained interest in securitized
receivables. Customer receivables include fixed-term loans and leases and revolving loans resulting from the sale of Dell products and
services. Financing receivables are presented net of the allowance for losses. See Note 6 of Notes to Consolidated Financial Statements
for additional information.
Asset Securitization — Dell sells certain financing receivables to unconsolidated qualifying special purpose entities in securitization
transactions. These receivables are removed from the Consolidated Statement of Financial Position at the time they are sold in accordance
with Statement of Financial Accounting Standards ("SFAS") No. 140, Accounting for Transfers and Servicing of Financial Assets and
Extinguishment of Liabilities — a Replacement of SFAS No. 125 ("SFAS 140"). Receivables are considered sold when the receivables are
transferred beyond the reach
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