HP 2014 Annual Report Download - page 62

HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
Management’s Discussion and Analysis of
Financial Condition and Results of Operations (Continued)
For a further discussion on fair value measurements and derivative instruments, refer to Note 10
and Note 11, respectively, to the Consolidated Financial Statements in Item 8, which are incorporated
herein by reference.
Loss Contingencies
We are involved in various lawsuits, claims, investigations and proceedings including those
consisting of IP, commercial, securities, employment, employee benefits and environmental matters that
arise in the ordinary course of business. We record a liability when we believe that it is both probable
that a liability has been incurred and the amount of loss can be reasonably estimated. Significant
judgment is required to determine both the probability of having incurred a liability and the estimated
amount of the liability. We review these matters at least quarterly and adjust these liabilities to reflect
the impact of negotiations, settlements, rulings, advice of legal counsel and other updated information
and events, pertaining to a particular case. Based on our experience, we believe that any damage
amounts claimed in the specific litigation and contingencies matters further discussed in Note 15 to the
Consolidated Financial Statements in Item 8, which is incorporated herein by reference, are not a
meaningful indicator of HP’s potential liability. Litigation is inherently unpredictable. However, we
believe we have valid defenses with respect to legal matters pending against us. Nevertheless, cash flows
or results of operations could be materially affected in any particular period by the resolution of one or
more of these contingencies. We believe we have recorded adequate provisions for any such matters
and, as of October 31, 2014, it was not reasonably possible that a material loss had been incurred in
excess of the amounts recognized in our financial statements.
ACCOUNTING PRONOUNCEMENTS
For a summary of recent accounting pronouncements applicable to our consolidated financial
statements see Note 1 to the Consolidated Financial Statements in Item 8, which is incorporated herein
by reference.
RESULTS OF OPERATIONS
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 performance excluding the impact of foreign
currency fluctuations, we present the year-over-year percentage change in revenue on a constant
currency basis, which assumes no change in foreign currency exchange rates from the prior-year period.
This information is provided so that revenue can be viewed without the effect of fluctuations in foreign
currency exchange rates, which is consistent with how management evaluates our revenue results and
trends. This constant currency disclosure is provided in addition to, and not as a substitute for, the
year-over-year percentage change in revenue on a GAAP basis. Other companies may calculate and
define similarly labeled items differently, which may limit the usefulness of this measure for
comparative purposes.
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