HP 2014 Annual Report Download - page 176
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HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Note 16: Guarantees (Continued)
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 and customers against claims of IP infringement made by
third parties arising from the vendor’s and customer’s use of HP’s software products and services and
certain other matters. Some indemnifications 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 and ongoing product failure rates, as well as
specific product class failures outside of HP’s baseline experience, affect the estimated warranty
obligation.
HP’s aggregate product warranty liabilities and changes during the fiscal years were as follows:
As of October 31
2014 2013
In millions
Balance at beginning of year ........................................ $2,031 $ 2,170
Accruals for warranties issued ........................................ 1,840 2,007
Adjustments related to pre-existing warranties (including changes in estimates) .... 12 (4)
Settlements made (in cash or in kind) .................................. (1,927) (2,142)
Balance at end of year ............................................. $1,956 $ 2,031
Note 17: Commitments
Lease Commitments
HP leases certain real and personal property under non-cancelable operating leases. Certain leases
require HP to pay property taxes, insurance and routine maintenance and include renewal options and
escalation clauses. Rent expense was approximately $1.0 billion in fiscal 2014, 2013 and 2012.
Property under capital leases comprised primarily of equipment and furniture. Capital lease assets
included in Property, plant and equipment in the Consolidated Balance Sheets were $229 million and
$437 million as of October 31, 2014 and October 31, 2013, respectively. Accumulated depreciation on
the property under capital lease was $207 million and $404 million as of October 31, 2014 and
October 31, 2013, respectively.
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