Dell 2007 Annual Report Download - page 80

Table of Contents
DELL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
$30 million; and 2012: $4 million. Fixed-term loans are also offered to qualified small businesses and primarily consist of loans
with short-term maturities.
The following table presents the net credit losses and accounts 60 days or more past due of customer receivables. Net credit losses on
leases and loans represent net investment balances. Net credit losses on revolving loans represent principal losses, net of recoveries. Net
credit losses increased in Fiscal 2008 due to higher delinquencies driven by deterioration in the credit environment.
Fiscal Year Ended
February 1, 2008 February 2, 2007
Dollars % Dollars %
(in millions, except percentages)
Net credit losses of customer financing receivables $ 40 2.7%(a) $ 20 1.5%(a)
Customer financing receivables 60 days or more delinquent $ 34 2.1%(b) $ 10 0.7%(b)
(a) Net credit losses as a percentage of the outstanding average customer receivables balance over the year.
(b) Customer financing receivables 60 days or more delinquent divided by the ending customer financing receivables balance.
• Dell retains a residual interest in the leased equipment. The amount of the residual interest is established at the inception of the lease
based upon estimates of the value of the equipment at the end of the lease term using historical studies, industry data, and future
value-at-risk demand valuation methods. On a periodic basis, Dell assesses the carrying amount of its recorded residual values for
impairment. Anticipated declines in specific future residual values that are considered to be other-than-temporary are recorded in
current earnings.
• Retained interests represent the residual beneficial interest Dell retains in certain pools of securitized financing receivables. Retained
interests are stated at the present value of the estimated net beneficial cash flows after payment of all senior interests. In estimating
the value of retained interests, Dell makes a variety of financial assumptions, including pool credit losses, payment rates, and
discount rates. These assumptions are supported by both Dell's historical experience and anticipated trends relative to the particular
receivable pool. Dell reviews its investments in retained interests periodically for impairment, based on estimated fair value. In the
first quarter of Fiscal 2008, Dell adopted SFAS 155, and as a result, all gains and losses are recognized in income immediately.
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