Lexmark 2007 Annual Report Download - page 62

Lexmark International, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular Dollars in Millions, Except Per Share Amounts)
1. ORGANIZATION AND BUSINESS
Since its inception in 1991, Lexmark International, Inc. (“Lexmark” or the “Company”) has become a
leading developer, manufacturer and supplier of printing and imaging solutions for offices and homes. The
Company’s products include laser printers, inkjet printers, multifunction devices, and associated supplies,
services and solutions. Lexmark also sells dot matrix printers for printing single and multi-part forms by
business users. The customers for Lexmark’s products are large enterprises, small and medium
businesses and consumers worldwide. The Company’s products are principally sold through resellers,
retailers and distributors in more than 150 countries in North and South America, Europe, the Middle East,
Africa, Asia, the Pacific Rim and the Caribbean.
2. SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation:
The accompanying consolidated financial statements include the accounts of the Company and its
subsidiaries. All significant intercompany accounts and transactions have been eliminated.
Use of Estimates:
The preparation of consolidated financial statements in conformity with accounting principles generally
accepted in the United States of America (“U.S.”) requires management to make estimates and judgments
that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of
contingent assets and liabilities. On an ongoing basis, the Company evaluates its estimates, including
those related to customer programs and incentives, product returns, doubtful accounts, inventories, stock-
based compensation, intangible assets, income taxes, warranty obligations, copyright fees, restructurings,
pension and other postretirement benefits, and contingencies and litigation. Lexmark bases its estimates
on historical experience and on various other assumptions that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about the carrying values of
assets and liabilities that are not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.
Foreign Currency Translation:
Assets and liabilities of non-U.S. subsidiaries that operate in a local currency environment are translated
into U.S. dollars at period-end exchange rates. Income and expense accounts are translated at average
exchange rates prevailing during the period. Adjustments arising from the translation of assets and
liabilities, changes in stockholders’ equity and results of operations are accumulated as a separate
component of Accumulated other comprehensive earnings (loss) in stockholders’ equity.
Cash Equivalents:
All highly liquid investments with an original maturity of three months or less at the Company’s date of
purchase are considered to be cash equivalents.
Marketable Securities:
Based on the Company’s expected holding period, Lexmark has classified all of its marketable securities
as available-for-sale and reported these investments in the Consolidated Statements of Financial Position
as current assets. Lexmark reports its available-for-sale marketable securities at fair value with unrealized
gains or losses recorded in Accumulated other comprehensive earnings (loss) on the Consolidated
Statements of Financial Position. The Company assesses its marketable securities for other-than-
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