Northrop Grumman 2011 Annual Report Download - page 73

NORTHROP GRUMMAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations – Northrop Grumman Corporation (herein referred to as “Northrop Grumman,” the
“company,” “we,” “us,” or “our”) provides technologically advanced, innovative products, services, and
integrated solutions in aerospace, electronics, information systems, and technical services. In March 2011, the
company completed the spin-off of the Shipbuilding segment. The remaining four segments are Aerospace
Systems, Electronic Systems, Information Systems, and Technical Services. Product sales are predominantly
generated in the Aerospace Systems and Electronic Systems segments, while the majority of the company’s service
revenues are generated by the Information Systems and Technical Services segments.
The company participates in many high-priority defense and government services technology programs in the
United States (U.S.) and abroad as a prime contractor, principal subcontractor, partner, or preferred supplier. We
conduct most of our business with the U.S. Government, principally the Department of Defense (DoD) and the
intelligence community. We also conduct business with local, state, and foreign governments and domestic and
international commercial customers.
Aerospace Systems is a leading designer, developer, integrator, and producer of manned and unmanned aircraft,
spacecraft, high-energy laser systems, microelectronics and other systems and subsystems critical to maintaining the
nation’s security and leadership in technology. Aerospace Systems’ customers, primarily government agencies, use
these systems in many different mission areas including intelligence, surveillance and reconnaissance;
communications; battle management; strike operations; electronic warfare; missile defense; earth observation; space
science; and space exploration.
Electronic Systems is a leader in the design, development, manufacture, and support of solutions for sensing,
understanding, anticipating, and controlling the environment for our global military, civil, and commercial
customers and their operations. The segment provides a variety of defense electronics and systems, airborne fire
control radars, situational awareness systems, early warning systems, airspace management systems, navigation
systems, communications systems, marine systems, space systems, and logistics services.
Information Systems is a leading provider of advanced solutions for DoD, national intelligence, federal civilian, state
and local agencies, and commercial customers. Products and services are focused on the fields of command,
control, communications, computers and intelligence; air and missile defense; airborne reconnaissance; intelligence
processing; decision support systems; cybersecurity; information technology; and systems engineering and
integration.
Technical Services is a provider of logistics, infrastructure, and sustainment support, providing an array of
modernization, high technology, and training and simulation services.
Principles of Consolidation – The consolidated financial statements include the accounts of Northrop Grumman and
its subsidiaries. All material intercompany accounts, transactions, and profits are eliminated in consolidation.
Investments in equity securities and joint ventures where the Company has significant influence, but not control,
are accounted for using the equity method.
Accounting Estimates – The company’s financial statements are prepared in conformity with accounting principles
generally accepted in the United States of America (GAAP). The preparation thereof requires management to
make estimates and judgments that affect the reported amounts of assets and liabilities and the disclosure of
contingencies at the date of the financial statements as well as the reported amounts of revenues and expenses
during the reporting period. Estimates have been prepared on the basis of the most current and best available
information and actual results could differ materially from those estimates.
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