HP 2005 Annual Report Download - page 102

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HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Note 8: Financial Instruments (Continued)
HP estimates the fair values of derivatives based on quoted market prices or pricing models using
current market rates and records all derivatives on the balance sheet at fair value. The gross notional
and fair market value of derivative financial instruments and the respective SFAS No. 133 classification
on the Consolidated Balance Sheets was as follows for the following fiscal years ended October 31:
2005
Long-term
Financing
Other Receivables Other
Gross Current and Accrued Other
Notional Assets Other Assets Liabilities Liabilities Total
In millions
Fair value hedges ........................ $ 2,725 $ 10 $— $ — $(37) $(27)
Cash flow hedges ........................ 7,813 52 1 (76) (3) (26)
Net investment hedges .................... 827 4 — (13) — (9)
Other derivatives ........................ 12,580 88 24 (91) (8) 13
Total ................................. $23,945 $154 $25 $(180) $(48) $(49)
2004
Long-term
Financing
Other Receivables Other
Gross Current and Accrued Other
Notional Assets Other Assets Liabilities Liabilities Total
In millions
Fair value hedges ........................ $ 6,006 $ 3 $26 $ — $ (21) $ 8
Cash flow hedges ........................ 5,221 11 4 (143) (14) (142)
Net investment hedges .................... 750 — — (43) — (43)
Other derivatives ........................ 14,393 131 8 (345) (71) (277)
Total ................................. $26,370 $145 $38 $(531) $(106) $(454)
Fair Value of Other Financial Instruments
For certain of HP’s financial instruments, including cash and cash equivalents, short-term
investments, accounts receivable, financing receivables, notes payable and short-term borrowings,
accounts payable and other accrued liabilities, the carrying amounts approximate fair value due to their
short maturities. The estimated fair value of HP’s short- and long-term debt was approximately
$5.1 billion at October 31, 2005, compared to a carrying value of $5.2 billion at that date. The
estimated fair value of the debt is based primarily on quoted market prices, as well as borrowing rates
currently available to HP for bank loans with similar terms and maturities.
Note 9: Financing Receivables and Operating Leases
Financing receivables represent sales-type and direct-financing leases resulting from the marketing
of HP’s and complementary third-party products. These receivables typically have terms from two to
five years and are usually collateralized by a security interest in the underlying assets. Financing
receivables also include billed receivables from operating leases. The components of net financing
98