HP 2014 Annual Report Download - page 110

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HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Note 2: Segment Information (Continued)
arrangement on which advanced royalty payments of $10.4 billion were received in the U.S. from a
foreign consolidated affiliate. Deferred intercompany royalty revenues of $9.9 billion will be recognized
over the life of the arrangement through 2029 in the respective legal entities, but eliminated from both
HP consolidated and segment revenues.
Financing interest in the Consolidated Statements of Earnings reflects interest expense on debt
attributable to HPFS. Debt attributable to HPFS consists of intercompany equity that is treated as debt
for segment reporting purposes, intercompany debt, and borrowing- and funding-related activity
associated with HPFS and its subsidiaries.
HP does not allocate to its segments certain operating expenses, which it manages at the corporate
level. These unallocated costs include certain corporate governance costs, stock-based compensation
expense, amortization of intangible assets, impairment of goodwill and intangible assets, restructuring
charges and acquisition-related charges.
Segment Realignment
Effective at the beginning of its first quarter of fiscal 2014, HP implemented certain organizational
changes to align its segment financial reporting more closely with its current business structure. These
organizational changes include:
• transferring the HP Exstream business from the Commercial Hardware business unit within the
Printing segment to the Software segment;
• transferring the Personal Systems trade and warranty support business from the TS business unit
within the EG segment to the Other business unit within the Personal Systems segment;
• transferring the spare and replacement parts business supporting the Personal Systems and
Printing segments from the TS business unit within the EG segment to the Other business unit
within the Personal Systems segment and the Commercial Hardware business unit within the
Printing segment, respectively;
• transferring certain cloud-related incubation activities previously reported in Corporate and
unallocated costs and eliminations and in the EG segment to the Corporate Investments
segment.
In addition, HP transferred certain intrasegment eliminations from the ES segment and the EG
segment to corporate intersegment revenue eliminations.
HP has reflected these changes to its segment information retrospectively to the earliest period
presented, which has resulted in the transfer of revenue among the Printing, Personal Systems, EG, ES
and Software segments and the transfer of operating profit among the Printing, Personal Systems, EG,
Software and Corporate Investments segments. These changes had no impact on the previously
reported financial results for the HPFS segment. In addition, none of these changes impacted HP’s
previously reported consolidated net revenue, earnings from operations, net earnings or net EPS.
102