HP 2008 Annual Report Download - page 96

HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Note 1: Summary of Significant Accounting Policies (Continued)
Derivative Financial Instruments
HP uses derivative financial instruments, primarily forwards, swaps, and options, to hedge certain
foreign currency and interest rate exposures. HP also may use other derivative instruments not
designated as hedges such as forwards used to hedge foreign currency balance sheet exposures. HP
does not use derivative financial instruments for speculative purposes. See Note 9 for a full description
of HP’s derivative financial instrument activities and related accounting policies, which is incorporated
herein by reference.
Investments
HP’s investments consist principally of time deposits, commercial paper, corporate debt, other debt
securities, and equity securities of publicly-traded and privately-held companies. HP classifies
investments with maturities of less than one year as short-term investments.
HP classifies its investments in debt securities and its equity investments in public companies as
available-for-sale securities and carries them at fair value. HP determines fair values for investments in
public companies using quoted market prices. HP records the unrealized gains and losses on
available-for-sale securities, net of taxes, in accumulated other comprehensive income (loss).
HP carries equity investments in privately-held companies at the lower of cost or fair value. HP
may estimate fair values for investments in privately-held companies based upon one or more of the
following: pricing models using historical and forecasted financial information and current market rates;
liquidation values; the values of recent rounds of financing; and quoted market prices of comparable
public companies.
Losses on Investments
HP monitors its investment portfolio for impairment on a periodic basis. In the event that the
carrying value of an investment exceeds its fair value and the decline in value is determined to be other
than temporary, HP records an impairment charge and establishes a new cost basis for the investment
at its current fair value. In order to determine whether a decline in value is other than temporary, HP
evaluates, among other factors: the duration and extent to which the fair value has been less than the
carrying value; the financial condition of and business outlook for the company or financial institution,
including key operational and cash flow metrics, current market conditions and future trends in the
issuer’s industry; the company’s relative competitive position within the industry; and HP’s intent and
ability to retain the investment for a period of time sufficient to allow for any anticipated recovery in
fair value.
HP determined the declines in value of certain investments to be other than temporary.
Accordingly, HP recorded impairments of approximately $27 million in fiscal 2008, $28 million in fiscal
2007 and $8 million in fiscal 2006. HP includes these impairments in gains (losses) on investments in
the Consolidated Statements of Earnings. Depending on market conditions, HP may record additional
impairments on its investment portfolio in the future.
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