HP 2005 Annual Report Download - page 88

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HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Note 1: Summary of Significant Accounting Policies (Continued)
the European Union (‘‘EU’’). Under the Directive, the waste management obligation for historical
equipment (products put on the market on or prior to August 13, 2005) remains with the commercial
user until the customer replaces the equipment. FSP 143-1 is required to be applied to the later of the
first reporting period ending after June 8, 2005 or the date of the Directive’s adoption into law by the
applicable EU member countries in which the manufacturers have significant operations. HP adopted
FSP 143-1 in the fourth quarter of fiscal 2005 and has determined that its effect did not have a
material impact on its consolidated results of operations and financial condition for fiscal 2005. See
Note 17 for further discussion of the Directive, which is incorporated herein by reference.
In November 2005, the FASB issued FSP FAS 115-1 and FAS 124-1, ‘‘The Meaning of
Other-Than-Temporary Impairment and Its Application to Certain Investments’’ (‘‘FSP 115-1’’), which
provides guidance on determining when investments in certain debt and equity securities are considered
impaired, whether that impairment is other-than-temporary, and on measuring such impairment loss.
FSP 115-1 also includes accounting considerations subsequent to the recognition of an other-than
temporary impairment and requires certain disclosures about unrealized losses that have not been
recognized as other-than-temporary impairments. FSP 115-1 is required to be applied to reporting
periods beginning after December 15, 2005 and is required to be adopted by HP in the second quarter
of fiscal 2006. HP is currently evaluating the effect that the adoption of FSP 115-1 will have on its
consolidated results of operations and financial condition but does not expect it to have a material
impact.
Note 2: Net Earnings Per Share (‘‘EPS’’)
HP’s basic EPS is calculated using net earnings and the weighted-average number of shares
outstanding during the reporting period. Diluted EPS includes the effect from potential issuance of
common stock, such as stock issuable pursuant to the exercise of stock options and the assumed
conversion of convertible notes.
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