HP 2013 Annual Report Download - page 133

HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Note 11: Guarantees (Continued)
triggering event occurs as defined by the guarantee. HP believes the likelihood of having to perform
under a material guarantee is remote.
HP has entered into service contracts with certain of its clients that are supported by financing
arrangements. If a service contract is terminated as a result of HP’s non-performance under the
contract or failure to comply with the terms of the financing arrangement, HP could, under certain
circumstances, be required to acquire certain assets related to the service contract. HP believes the
likelihood of it being required to acquire a material amount of assets under these arrangements is
remote.
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. HP also
provides indemnifications to certain vendors against claims of intellectual property infringement made
by third parties arising from the vendor’s use of HP’s software products and certain other matters. Such
indemnification obligations may not be subject to maximum loss clauses. Historically, payments made
related to these indemnifications have been immaterial.
Warranty
HP accrues 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, contractual warranty terms, repair costs, product call rates,
average cost per call, current period product shipments, ongoing product failure rates, as well as
specific product class failures outside of HP’s baseline experience, affect the estimated warranty
obligation.
The changes in HP’s aggregate product warranty liabilities were as follows for the following fiscal
years ended October 31:
2013 2012
In millions
Balance at beginning of year ........................................ $2,170 $ 2,451
Accruals for warranties issued ........................................ 2,007 2,249
Adjustments related to pre-existing warranties (including changes in estimates) .... (4) (79)
Settlements made (in cash or in kind) .................................. (2,142) (2,451)
Balance at end of year ............................................. $2,031 $ 2,170
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