HP 2008 Annual Report Download - page 54

HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
Management’s Discussion and Analysis of
Financial Condition and Results of Operations (Continued)
liability (debt) and equity (conversion option) components of the instrument in a manner that reflects
the issuer’s non-convertible debt borrowing rate. FSP APB 14-1 is effective for fiscal years beginning
after December 15, 2008 on a retroactive basis and will be adopted by us in the first quarter of fiscal
2010. We are currently evaluating the potential impact of the adoption of FSP APB 14-1 on our
consolidated results of operations and financial condition.
In June 2008, the FASB issued FSP Emerging Issues Task Force (‘‘EITF’’) 03-6-1, ‘‘Determining
Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities.’’ FSP
EITF 03-6-1 clarifies that share-based payment awards that entitle their holders to receive
nonforfeitable dividends or dividend equivalents before vesting should be considered participating
securities. We have some grants of restricted stock that contain non-forfeitable rights to dividends and
will be considered participating securities upon adoption of FSP EITF 03-6-1. As participating
securities, we will be required to include these instruments in the calculation of earnings per share
(‘‘EPS’’), and we will need to calculate EPS using the ‘‘two-class method.’’ The two-class method of
computing EPS is an earnings allocation formula that determines EPS for each class of common stock
and participating security according to dividends declared (or accumulated) and participation rights in
undistributed earnings. FSP EITF 03-6-1 is effective for fiscal years beginning after December 15, 2008
on a retrospective basis and will be adopted by us in the first quarter of fiscal 2010. We are currently
evaluating the potential impact, if any, the adoption of FSP EITF 03-6-1 could have on our calculation
of EPS.
In November 2008, the FASB ratified EITF Issue No. 08-7, ‘‘Accounting for Defensive Intangible
Assets,’’ (‘‘EITF 08-7’’). EITF 08-7 applies to defensive intangible assets, which are acquired intangible
assets that the acquirer does not intend to actively use but intends to hold to prevent its competitors
from obtaining access to them. As these assets are separately identifiable, EITF 08-7 requires an
acquiring entity to account for defensive intangible assets as a separate unit of accounting. Defensive
intangible assets must be recognized at fair value in accordance with SFAS 141(R) and SFAS 157.
EITF 08-7 is effective for defensive intangible assets acquired in fiscal years beginning on or after
December 15, 2008 and will be adopted by us in the first quarter of fiscal 2010. We are currently
evaluating the potential impact, if any, of the adoption of EITF 08-7 on our consolidated results of
operations and financial condition.
During fiscal 2008, we adopted FIN 48. See Note 13 to the Consolidated Financial Statements in
Item 8, which is incorporated herein by reference, for the effect of applying FIN 48.
RESULTS OF OPERATIONS
The following discussion compares the historical results of operations on a GAAP basis for the
fiscal years ended October 31, 2008, 2007, and 2006. As discussed above, we have included the results
of the business operations acquired from EDS in our consolidated results of operations beginning on
August 26, 2008, the closing date of the EDS acquisition, and we have included those business
operations as a separate business unit within HPS for financial reporting purposes.
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