HP 2015 Annual Report Download - page 169

Table of Contents
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HP is involved in lawsuits, claims, investigations and proceedings, including those identified below, consisting of IP, commercial, securities,
employment, employee benefits and environmental matters that arise in the ordinary course of business. HP accrues a liability when management believes
that it is both probable that a liability has been incurred and the amount of loss can be reasonably estimated. HP believes it has recorded adequate provisions
for any such matters and, as of October 31, 2015, it was not reasonably possible that a material loss had been incurred in excess of the amounts recognized in
HP's financial statements. HP reviews these matters at least quarterly and adjusts its accruals to reflect the impact of negotiations, settlements, rulings, advice
of legal counsel, and other information and events pertaining to a particular case. Based on its experience, HP believes that any damage amounts claimed in
the specific matters discussed below are not a meaningful indicator of HP's potential liability. Litigation is inherently unpredictable. However, HP believes it
has valid defenses with respect to legal matters pending against it. 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.
Under the separation and distribution agreement, HP and Hewlett Packard Enterprise agreed to cooperate with each other in managing litigation and
environmental matters related to both companies' businesses. The separation and distribution agreement also included provisions that assign to each
company responsibility for managing pending and future litigation and environmental matters related to the general corporate matters of HP arising prior to
the Separation.

 As described below, proceedings are ongoing or have been concluded involving HP in certain European Union ("EU") member
countries, including litigation in Germany, Belgium and Austria, seeking to impose or modify levies upon equipment (such as multi-function devices
("MFDs"), PCs and printers) and alleging that these devices enable producing private copies of copyrighted materials. Descriptions of some of the ongoing
proceedings are included below. The levies are generally based upon the number of products sold and the per-product amounts of the levies, which vary.
Some EU member countries that do not yet have levies on digital devices are expected to implement similar legislation to enable them to extend existing
levy schemes, while some other EU member countries have phased out levies or are expected to limit the scope of levy schemes and applicability in the
digital hardware environment, particularly with respect to sales to business users. HP, other companies and various industry associations have opposed the
extension of levies to the digital environment and have advocated alternative models of compensation to rights holders.
VerwertungsGesellschaft Wort ("VG Wort"), a collection agency representing certain copyright holders, instituted legal proceedings against HP in the
Stuttgart Civil Court seeking to impose levies on
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awards outstanding. For fiscal 2014 and 2013, the net earnings allocated to participating securities were not significant.
(2) HP excludes options and restricted stock units where the assumed proceeds exceed the average market price from the calculation of
diluted net EPS, because their effect would be anti-dilutive. The assumed proceeds of an option include the sum of its exercise price,
average unrecognized compensation cost and excess tax benefits. The assumed proceeds of a restricted stock unit include the sum of
its average unrecognized compensation cost and excess tax benefits.
Source: HP INC, 10-K, December 16, 2015 Powered by Morningstar® Document Research℠
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