HP 2010 Annual Report Download - page 54

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HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
Management’s Discussion and Analysis of
Financial Condition and Results of Operations (Continued)
judgment is required to determine both probability and the estimated amount. We review these
provisions at least quarterly and adjust these provisions to reflect the impact of negotiations,
settlements, rulings, advice of legal counsel, and updated information. Litigation is inherently
unpredictable and is subject to significant uncertainties, some of which are beyond our control. Should
any of these estimates and assumptions change or prove to have been incorrect, it could have a
material impact on our results of operations, financial position and cash flows. See Note 18 to the
Consolidated Financial Statements in Item 8 for a further discussion of litigation and contingencies.
ACCOUNTING PRONOUNCEMENTS
In June 2009, the FASB issued a new accounting standard related to the consolidation of variable
interest entities. It eliminates the quantitative approach previously required for determining the primary
beneficiary of a variable interest entity and requires ongoing qualitative reassessments of whether an
enterprise is the primary beneficiary of a variable interest entity. This new standard also requires
additional disclosures about an enterprise’s involvement in variable interest entities. We will adopt this
new accounting standard in the first quarter of fiscal 2011. We do not expect the adoption of this
standard will have a material effect on our consolidated financial statements.
CONSTANT CURRENCY PRESENTATION
Revenue from our international operations has historically represented, and we expect will
continue to represent, a majority of our overall net revenue. As a result, our revenue growth has been
impacted, and we expect will continue to be impacted, by fluctuations in foreign currency exchange
rates. In order to provide a framework for assessing how each of our business segments performed
excluding the impact of foreign currency fluctuations, we present the year-over-year percentage change
in revenue performance on a constant currency basis, which assumes no change in the exchange rate
from the prior-year period. This constant currency disclosure is provided in addition to, and not as a
substitute for, the year-over-year percentage change in revenue on an as-reported basis.
RESULTS OF OPERATIONS
The following discussion compares the historical results of operations on a GAAP basis for the
fiscal years ended October 31, 2010, 2009, and 2008. Unless otherwise noted, all comparative
performance data included below reflect year-over-year comparisons.
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