HP 2006 Annual Report Download - page 110
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HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Note 9: Financial Instruments (Continued)
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, 2006, 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 10: Financing Receivables and Operating Leases
Financing receivables represent sales-type and direct-financing leases resulting from the marketing
of HP’s and 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 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:
2006 2005
In millions
Minimum lease payments receivable ................................... $5,010 $ 5,018
Allowance for doubtful accounts ...................................... (80) (111)
Unguaranteed residual value ........................................ 289 301
Unearned income ................................................ (439) (411)
Financing receivables, net ........................................... 4,780 4,797
Less current portion ............................................... (2,440) (2,551)
Amounts due after one year, net ..................................... $2,340 $ 2,246
As of October 31, 2006, scheduled maturities of HP’s minimum lease payments receivable were as
follows for the following fiscal years ended October 31:
2007 2008 2009 2010 2011 Thereafter Total
In millions
Scheduled maturities of minimum lease
payments receivable ................ $2,570 $1,413 $661 $221 $86 $59 $5,010
Equipment leased to customers under operating leases was $2.1 billion at October 31, 2006 and
$1.9 billion at October 31, 2005 and is included in machinery and equipment. Accumulated
depreciation on equipment under lease was $0.6 billion at October 31, 2006 and at October 31, 2005.
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