HP 2005 Annual Report Download - page 103

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HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Note 9: Financing Receivables and Operating Leases (Continued)
receivables, which are included in financing receivables and long-term financing receivables and other
assets, were as follows for the following fiscal years ended October 31:
2005 2004
In millions
Minimum lease payments receivable ................................... $5,018 $ 5,328
Allowance for doubtful accounts ...................................... (111) (213)
Unguaranteed residual value ........................................ 301 394
Unearned income ................................................ (411) (396)
Financing receivables, net ......................................... 4,797 5,113
Less current portion ............................................... (2,551) (2,945)
Amounts due after one year, net ..................................... $2,246 $ 2,168
Scheduled maturities of HP’s minimum lease payments receivable are as follows for the following
fiscal years ended October 31, 2005:
2006 2007 2008 2009 2010 Thereafter Total
In millions
Scheduled maturities of minimum lease
payments receivable ................ $2,649 $1,472 $658 $183 $45 $11 $5,018
Equipment leased to customers under operating leases was $1.9 billion at October 31, 2005 and
$2.3 billion at October 31, 2004 and is included in machinery and equipment. Accumulated
depreciation on equipment under lease was $0.6 billion at October 31, 2005 and $0.9 billion at
October 31, 2004. Minimum future rentals on non-cancelable operating leases related to leased
equipment are as follows for the following fiscal years ended October 31, 2005:
2006 2007 2008 2009 2010 Thereafter Total
In millions
Minimum future rentals on non-cancelable
operating leases ..................... $668 $380 $196 $23 $11 $12 $1,290
Note 10: Guarantees
Indemnifications
In the ordinary course of business, HP enters into contractual arrangements under which it may
agree to indemnify the third party to such arrangement from any losses incurred relating to the services
they perform on behalf of HP or for losses arising from certain events as defined within the particular
contract, which may include, for example, litigation or claims relating to past performance. Such
indemnification obligations may not be subject to maximum loss clauses. Historically, payments made
related to these indemnifications have been immaterial.
Warranty
HP provides for the estimated cost of product warranties at the time it recognizes revenue. HP
engages in extensive product quality programs and processes, including actively monitoring and
evaluating the quality of its component suppliers; however, product warranty terms offered to
customers, ongoing product failure rates, material usage and service delivery costs incurred in
correcting a product failure, as well as specific product class failures outside of HP’s baseline
99