HP 2005 Annual Report Download - page 132

HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Note 17: Litigation and Contingencies (Continued)
Canada Dispute. The Government of Canada conducted cost audits of certain contracts between
Public Works and Government Services Canada (‘‘PWGSC’’) and each of Compaq Canada Corp. and
Hewlett-Packard (Canada) Co. relating to services provided to the Canadian Department of National
Defence (‘‘DND’’). Compaq Canada Corp. was combined with Hewlett-Packard (Canada) Co. following
HP’s acquisition of Compaq. HP cooperated fully with the audit and conducted its own inquiry, sharing
the results of its investigation with PWGSC and DND. On May 14, 2004, HP announced that it had
resolved the dispute with the Government of Canada. HP Canada agreed to reimburse the Government
of Canada the sum of CDN$146 million (approximately US $105 million), an amount determined by
both parties to be appropriate upon investigation. HP recorded $70 million in the second quarter of
fiscal 2004 and recorded $35 million in fiscal 2003. HP determined that it was important for HP to
honor its contractual obligations, rather than engage in protracted litigation with the Government of
Canada, despite the lack of evidence that HP employees derived any improper benefit from the
complex scheme designed to exploit both parties. HP has entered into agreements to recover, and has
recovered, approximately $10 million of these funds from certain responsible individuals and continues
to consider further proceedings against others to recover additional funds.
Environmental
HP is party to, or otherwise involved in, proceedings brought by United States or state
environmental agencies under the Comprehensive Environmental Response, Compensation and
Liability Act (‘‘CERCLA’’), known as ‘‘Superfund,’’ or state laws similar to CERCLA. HP is also
conducting environmental investigations or remediations at several current or former operating sites
pursuant to administrative orders or consent agreements with state environmental agencies. It is our
policy to apply strict standards for environmental protection to sites inside and outside the United
States, even if not subject to regulations imposed by local governments.
The European Union (‘‘EU’’) has enacted the Waste Electrical and Electronic Equipment
Directive, which makes producers of electrical goods, including computers and printers, financially
responsible for specified collection, recycling, treatment and disposal of past and future covered
products. The deadline for the individual member states of the EU to enact the directive in their
respective countries was August 13, 2004 (such legislation, together with the directive, the ‘‘WEEE
Legislation’’). Producers participating in the market were financially responsible for implementing these
responsibilities under the WEEE Legislation beginning in August 2005. Implementation in certain of
the member states potentially may be delayed into 2006. Similar legislation has been or may be enacted
in other jurisdictions, including in the United States, Canada, Mexico, China and Japan. HP is
continuing to evaluate the impact of the WEEE Legislation and similar legislation in other jurisdictions
as individual countries issue their implementation guidance.
The liability for environmental remediation and other environmental costs is accrued when it is
considered probable and the costs can be reasonably estimated. We have accrued amounts in
conjunction with the foregoing environmental issues that we believe were adequate as of October 31,
2005. These accruals were not material to our operations or financial position and we do not currently
anticipate material capital expenditures for environmental control facilities.
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