HP 2006 Annual Report Download - page 111
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HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Note 10: Financing Receivables and Operating Leases (Continued)
As of October 31, 2006, minimum future rentals on non-cancelable operating leases related to leased
equipment were as follows for the following fiscal years ended October 31:
2007 2008 2009 2010 2011 Thereafter Total
In millions
Minimum future rentals on non-cancelable
operating leases ....................... $692 $386 $124 $49 $11 $27 $1,289
Note 11: Guarantees
Indemnifications
In the ordinary course of business, HP enters into contractual arrangements under which HP 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
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.
The changes in HP’s aggregate product warranty liabilities were as follows for the following fiscal
years ended October 31:
2006 2005
In millions
Product warranty liability at beginning of year ...................... $2,172 $2,040
Accruals for warranties issued .................................. 2,467 2,502
Adjustments related to pre-existing warranties (including changes in
estimates) ............................................... (45) (17)
Settlements made (in cash or in kind) ............................ (2,346) (2,353)
Product warranty liability at end of year ........................... $2,248 $2,172
107