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HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Note 1: Summary of Significant Accounting Policies (Continued)
liabilities to be measured at fair value, and does not expand the use of fair value in any new
circumstances. SFAS 157 is effective for financial statements issued for fiscal years beginning after
November 15, 2007 and is required to be adopted by HP in the first quarter of fiscal 2009. HP is
currently evaluating the effect that the adoption of SFAS 157 will have on its consolidated results of
operations and financial condition and is not yet in a position to determine such effects.
In September 2006, the FASB issued SFAS No. 158, ‘‘Employers’ Accounting for Defined Benefit
Pension and Other Postretirement Plans—An Amendment of FASB No. 87, 88, 106 and 132(R)’’
(‘‘SFAS 158’’). SFAS 158 requires that the funded status of defined benefit postretirement plans be
recognized on the company’s balance sheet, and changes in the funded status be reflected in
comprehensive income, effective fiscal years ending after December 15, 2006, which HP expects to
adopt effective October 31, 2007. SFAS also requires companies to measure the funded status of the
plan as of the date of its fiscal year-end, effective for fiscal years ending after December 15, 2008. HP
expects to adopt the measurement provisions of SFAS 158 effective October 31, 2009. Based upon the
October 31, 2006 balance sheet and pension disclosures, the impact of adopting SFAS 158 is estimated
to be a decrease in assets of $821 million, a decrease in liabilities of $4 million and a pretax increase in
the accumulated other comprehensive loss of $817 million. The effect of adoption will differ from the
estimate due to actual plan asset and liability experience in fiscal 2007.
In September 2006, the SEC issued SAB No. 108, ‘‘Considering the Effects of Prior Year
Misstatements when Quantifying Misstatements in Current Year Financial Statements’’ (‘‘SAB 108’’).
SAB 108 provides guidance on the consideration of the effects of prior year misstatements in
quantifying current year misstatements for the purpose of a materiality assessment. SAB 108 establishes
an approach that requires quantification of financial statement errors based on the effects of each of
the company’s balance sheet and statement of operations and the related financial statement
disclosures. Early application of the guidance in SAB 108 is encouraged in any report for an interim
period of the first fiscal year ending after November 15, 2006, and will be adopted by HP in the first
quarter of fiscal 2007. HP does not expect the adoption of SAB 108 to have a material impact on its
consolidated results of operations and financial condition.
In addition, HP is reviewing the following Emerging Issues Task Force (‘‘EITF’’) consensuses and
does not currently expect that the adoption of these will have a material impact on its consolidated
results of operations and financial condition:
• EITF 05-5, ‘‘Accounting for Early Retirement or Postemployment Programs with Specific
Features (Such as Terms Specified in Altersteilzeit Early Retirement Arrangements.’’ Issued in
June 2005 and effective for HP in the first quarter of fiscal 2007, this EITF applies to early
retirement programs which create incentives for employees, within a specific age group, to
transition from full or part-time employment to retirement before legal retirement age.
• EITF 06-2, ‘‘Accounting for Sabbatical Leave and Other Similar Benefits.’’ Issued in June 2006
and effective for HP in the first quarter of fiscal 2008, this EITF applies to compensated
absences that require a minimum service period but have no increase in the benefit even with
additional years of service.
• EITF 06-9, ‘‘Reporting a Change in (or the Elimination of) a Previously Existing Difference
between the Fiscal Year End of a Parent Company and That of a Consolidated Entity or
between the Reporting Period of an Investor and That of an Equity Method Investee.’’ Issued in
November 2006 and effective for HP in the second quarter of fiscal 2008, this EITF requires
certain disclosures whenever a change is made to modify or eliminate the time lag (usually three
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