HP 2014 Annual Report Download - page 97

HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 1: Summary of Significant Accounting Policies
Principles of Consolidation
The Consolidated Financial Statements include the accounts of Hewlett-Packard Company (‘‘HP’’)
and the subsidiaries and affiliates in which HP has a controlling financial interest or is the primary
beneficiary. HP accounts for investments in companies over which HP has the ability to exercise
significant influence but does not hold a controlling interest under the equity method, and HP records
its proportionate share of income or losses in Interest and other, net in the Consolidated Statements of
Earnings. HP presents non-controlling interests as a separate component within Total stockholder’s
equity in the Consolidated Balance Sheets. Net earnings attributable to the non-controlling interests are
eliminated within Interest and other, net in the Consolidated Statements of Earnings and are not
presented separately as they were not material for any period presented. HP has eliminated all
intercompany accounts and transactions.
Reclassifications
HP has made certain segment and business unit realignments in order to optimize its operating
structure. Reclassifications of certain prior-year segment and business unit financial information have
been made to conform to the current-year presentation. None of the changes impacts HP’s previously
reported consolidated net revenue, earnings from operations, net earnings or net earnings per share
(‘‘EPS’’). See Note 2 for a further discussion of HP’s segment reorganization.
Use of Estimates
The preparation of financial statements in accordance with United States (‘‘U.S.’’) generally
accepted accounting principles (‘‘GAAP’’) requires management to make estimates and assumptions
that affect the amounts reported in HP’s Consolidated Financial Statements and accompanying notes.
Actual results could differ materially from those estimates.
Foreign Currency Translation
HP predominately uses the U.S. dollar as its functional currency. Assets and liabilities
denominated in non-U.S. dollars are remeasured into U.S. dollars at current exchange rates for
monetary assets and liabilities and at historical exchange rates for nonmonetary assets and liabilities.
Net revenue, costs and expenses denominated in non-U.S. dollars are recorded in U.S. dollars at
monthly average exchange rates prevailing during the period. HP includes gains or losses from foreign
currency remeasurement in Interest and other, net in the Consolidated Statements of Earnings. Certain
non-U.S. subsidiaries designate the local currency as their functional currency, and HP records the
translation of their assets and liabilities into U.S. dollars at the balance sheet date as translation
adjustments and includes them as a component of Accumulated other comprehensive loss in the
Consolidated Balance Sheets.
Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (‘‘FASB’’) amended the existing
accounting standards for revenue recognition. The amendments are based on the principle that revenue
should be recognized to depict the transfer of promised goods or services to customers in an amount
that reflects the consideration to which the entity expects to be entitled in exchange for those goods or
services. HP is required to adopt the amendments in the first quarter of fiscal 2018. Early adoption is
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