HP 2015 Annual Report Download - page 50

Table of Contents
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For a further discussion of trends, uncertainties and other factors that could impact our operating results, see the section entitled "Risk Factors" in
Item 1A, which is incorporated herein by reference.
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The Consolidated Financial Statements of HP are prepared in accordance with U.S. generally accepted accounting principles ("GAAP"), which require
management to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, net revenue and expenses, and the
disclosure of contingent liabilities. Management bases its estimates on historical experience and on various other assumptions that it believes to be
reasonable under the circumstances, the results of which form the basis for making judgments about the carrying amount of assets and liabilities that are not
readily apparent from other sources. Management has discussed the development, selection and disclosure of these estimates with the Audit Committee of
HP's Board of Directors. Management believes that the accounting estimates employed and the resulting amounts are reasonable; however, actual results may
differ from these estimates. Making estimates and judgments about future events is inherently unpredictable and is subject to significant uncertainties, some
of which are beyond our control. Should any of these estimates and assumptions change or prove to have been incorrect, it could have a material impact on
our results of operations, financial position and cash flows.
A summary of significant accounting policies is included in Note 1 to the Consolidated Financial Statements in Item 8, which is incorporated herein by
reference. An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly
uncertain at the time the estimate is made, if different estimates reasonably could have been used, or if changes in the estimate that are reasonably possible
could materially impact the financial statements. Management believes the following critical accounting policies reflect the significant estimates and
assumptions used in the preparation of the Consolidated Financial Statements.
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We recognize revenue when persuasive evidence of an arrangement exists, delivery has occurred or services are rendered, the sales price or fee is fixed or
determinable and collectability is reasonably assured, as well as when other revenue recognition principles are met, including industry-specific revenue
recognition guidance.
We enter into contracts to sell our products and services, and while many of our sales agreements contain standard terms and conditions, there are
agreements we enter into which contain non-standard terms and conditions. Further, many of our arrangements include multiple elements. As a result,
significant contract interpretation may be required to determine the appropriate accounting, including the identification of deliverables considered to be
separate units of accounting, the allocation of the transaction price among elements in the arrangement and the timing of revenue recognition for each of
those elements.
We recognize revenue for delivered elements as separate units of accounting when the delivered elements have standalone value to the customer. For
elements with no standalone value, we recognize revenue consistent with the pattern of the undelivered elements. If the arrangement includes a customer-
negotiated refund or return right or other contingency relative to the delivered items and the delivery and performance of the undelivered items is considered
probable and substantially within our control, the delivered element constitutes a separate unit of accounting. In arrangements with
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Source: HP INC, 10-K, December 16, 2015 Powered by Morningstar® Document Research℠
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