Lexmark 2011 Annual Report Download - page 77

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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, imaging, document workflow, and content
management solutions for the office. The Company operates in the office imaging and enterprise
content and business process management (“ECM and BPM”) markets. Lexmark’s products include
laser printers, inkjet printers, multifunction devices, dot matrix printers and the associated supplies/
solutions/services, and ECM and BPM software solutions and services. The major customers for
Lexmark’s products are large corporations, small and medium businesses (“SMBs”), and the public
sector. The Company’s products are principally sold through resellers, retailers and distributors in more
than 170 countries in North and South America, Europe, the Middle East, Africa, Asia, the Pacific Rim
and the Caribbean.
2. SIGNIFICANT ACCOUNTING POLICIES
The Company’s significant accounting policies are an integral part of its financial statements.
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, as well as
disclosures regarding contingencies. 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, goodwill, intangible assets, income taxes, warranty
obligations, copyright fees, restructurings, pension and other postretirement benefits, contingencies
and litigation, long-lived assets, and fair values that are based on unobservable inputs significant to the
overall measurement. Lexmark bases its estimates on historical experience, market conditions, and
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 and Remeasurement:
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.
Certain non-U.S. subsidiaries use the U.S. dollar as their functional currency. Local currency
transactions of these subsidiaries are remeasured using a combination of current and historical
exchange rates. The effect of re-measurement is included in net earnings.
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