HP 2005 Annual Report Download - page 104

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HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Note 10: Guarantees (Continued)
experience, affect the estimated warranty obligation. If actual product failure rates, material usage or
service delivery costs differ from estimates, revisions to the estimated warranty liability would be
required.
Information regarding the changes in HP’s aggregate product warranty liabilities is as follows for
the following fiscal years ended October 31:
2005 2004
In millions
Product warranty liability at beginning of year ..................... $2,040 $ 1,987
Accruals for warranties issued ................................. 2,502 2,504
Adjustments related to pre-existing warranties (including changes in
estimates) .............................................. (17) (86)
Settlements made (in cash or in kind) ........................... (2,353) (2,365)
Product warranty liability at end of year .......................... $2,172 $ 2,040
Deferred Revenue
The components of deferred revenue were as follows for the following fiscal years ended
October 31:
2005 2004
In millions
Deferred support contract services revenue ......................... $3,188 $2,780
Other deferred revenue ....................................... 1,958 1,568
Total deferred revenue ...................................... 5,146 4,348
Less current portion ......................................... 3,815 2,958
Long-term deferred revenue ................................... $1,331 $1,390
Deferred support contract services revenue represents amounts received or billed in advance
primarily for fixed-price support or maintenance contracts. These services include stand-alone product
support packages, routine maintenance service contracts, upgrades or extensions to standard product
warranty, as well as high availability services for complex, global, networked, multi-vendor
environments. HP defers these service amounts at the time it bills the customer and then recognizes
them ratably over the contract life or as HP renders the services.
Other deferred revenue represents amounts received or billed in advance for contracts related
primarily to consulting and integration projects, managed services start-up or transition work, as well as
minor amounts for training, and product sales.
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