Dell 2007 Annual Report Download - page 57

Table of Contents
DELL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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. The resulting gains and losses from
these foreign currency translation adjustments totaled a $16 million loss, $33 million loss, and $22 million loss at February 1, 2008,
February 2, 2007, and February 3, 2006, 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 of exchange for nonmonetary assets
and liabilities. Gains and losses from remeasurement of monetary assets and liabilities are included in investment and other income, net.
Hedging Instruments — Dell uses derivative financial instruments, primarily forwards, options, and swaps to hedge certain foreign
currency and interest rate exposures. Dell also uses other derivative instruments not designated as hedges such as forwards to hedge
foreign currency balance sheet exposures. Dell does not use derivatives for speculative purposes.
Dell applies SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, ("SFAS 133") as amended, which establishes
accounting and reporting standards for derivative instruments and hedging activities. SFAS 133 requires Dell to recognize all derivatives
as either assets or liabilities in its Consolidated Statements of Financial Position and measure those instruments at fair value. See Note 2
of Notes to Consolidated Financial Statements for a full description of Dell's derivative financial instrument activities and related
accounting policies.
Treasury Stock — Effective with the beginning of the second quarter of Fiscal 2002, Dell began holding repurchased shares of its
common stock as treasury stock. Prior to that date, Dell retired all such repurchased shares, which were recorded as a reduction to
retained earnings. Dell accounts for treasury stock under the cost method and includes treasury stock as a component of stockholders'
equity.
Revenue Recognition — Dell's revenue recognition policy is in accordance with the requirements of Staff Accounting Bulletin ("SAB")
No. 104, Revenue Recognition, ("SAB 104"), Emerging Issues Task Force ("EITF") 00-21, Accounting for Revenue Arrangements with
Multiple Deliverables, AICPA Statement of Position ("SOP") No. 97-2, Software Revenue Recognition, EITF 01-09, Accounting for
Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor's Products) ("EITF 01-09") and other applicable
revenue recognition guidance and interpretations. Net revenues include sales of hardware, software and peripherals, and services
(including extended service contracts and professional services). Dell recognizes revenue for these products when it is realized or
realizable and earned. Revenue is considered realized and earned when:
• persuasive evidence of an arrangement exists;
• delivery has occurred or services have been rendered;
• Dell's fee to its customer is fixed or determinable; and
• collection of the resulting receivable is reasonably assured.
Revenue from the sale of products are recognized when title and risk of loss passes to the customer. Delivery is considered complete
when products have been shipped to Dell's customer or services have been rendered, title and risk of loss has transferred to the customer,
and customer acceptance has been satisfied through obtaining acceptance from the customer, the acceptance provision lapses, or Dell has
evidence that the acceptance provisions have been satisfied.
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