Xerox 2007 Annual Report Download - page 83

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per-share data and unless otherwise indicated)
Note 1 – Summary of Significant Accounting Policies
References herein to “we,” “us,” “our,” the “Company,”
and Xerox refer to Xerox Corporation and its consolidated
subsidiaries unless the context specifically requires
otherwise.
Description of Business and Basis of Presentation:
We are a technology and services enterprise and a leader
in the global document market. We develop, manufacture,
market, service and finance a complete range of
document equipment, solutions and services.
Basis of Consolidation: The Consolidated Financial
Statements include the accounts of Xerox Corporation and
all of our controlled subsidiary companies. All significant
intercompany accounts and transactions have been
eliminated. Investments in business entities in which we
do not have control, but we have the ability to exercise
significant influence over operating and financial policies
(generally 20% to 50% ownership), are accounted for
using the equity method of accounting. Upon the sale of
stock of a subsidiary, we recognize a gain or loss in our
Consolidated Statements of Income equal to our
proportionate share of the corresponding increase or
decrease in that subsidiary’s equity. Operating results of
acquired businesses are included in the Consolidated
Statements of Income from the date of acquisition.
We consolidate variable interest entities if we are
deemed to be the primary beneficiary of the entity.
Operating results for variable interest entities in which we
are determined to be the primary beneficiary are included
in the Consolidated Statements of Income from the date
such determination is made.
For convenience and ease of reference, we refer to
the financial statement caption “Income from Continuing
Operations before Income Taxes, Equity Income,
Discontinued Operations and Cumulative Effect of Change
in Accounting Principle” as “pre-tax income,” throughout
the notes to the Consolidated Financial Statements.
Use of Estimates: The preparation of our
Consolidated Financial Statements, in accordance with
accounting principles generally accepted in the United
States of America, requires that we make estimates and
assumptions that affect the reported amounts of assets
and liabilities, as well as the disclosure of contingent
assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and
expenses during the reporting period. Significant
estimates and assumptions are used for, but not limited
to: (i) allocation of revenues and fair values in leases and
other multiple element arrangements; (ii) accounting for
residual values; (iii) economic lives of leased assets;
(iv) allowance for doubtful accounts; (v) inventory
valuation; (vi) restructuring and related charges; (vii) asset
impairments; (viii) depreciable lives of assets; (ix) useful
lives of intangible assets; (x) pension and post-retirement
benefit plans; (xi) income tax reserves and valuation
allowances and (xii) contingency and litigation reserves.
Future events and their effects cannot be predicted with
certainty; accordingly, our accounting estimates require
the exercise of judgment. The accounting estimates used
in the preparation of our Consolidated Financial
Statements will change as new events occur, as more
experience is acquired, as additional information is
obtained and as our operating environment changes.
Actual results could differ from those estimates.
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