EMC 2006 Annual Report Download - page 37

Table of Contents
Based upon our historical experience and information known as of December 31, 2006, we believe our liability on the above guarantees and
indemnities at December 31, 2006 is not material.
Notes and Accounts Receivable
We derive revenues from both selling and leasing information storage systems. We customarily sell the notes receivable resulting from our leasing
activity to provide for current liquidity. Generally, we do not retain any recourse on the sale of these notes.
Litigation
We are a party to litigation which we consider routine and incidental to our business. Management does not expect the results of any of these actions to
have a material adverse effect on our business, results of operations or financial condition.
Pension and Post-Retirement Medical and Life Insurance Plans
We have noncontributory defined benefit pension plans which were assumed as part of the Data General acquisition, which cover substantially all
former Data General employees located in the U.S. and Canada (the "Pension Plans"). The Pension Plans were frozen in 1999, resulting in employees no
longer accruing pension benefits for future services. The assets for the Pension Plans are invested in common stocks, bonds and cash. The market related
value of the plans' assets is based upon the assets' fair value. The expected long-term rate of return on assets for the year ended December 31, 2006 was
8.25%. This rate represents the average of the long-term rates of return for the Pension Plans weighted by the plans' assets as of December 31, 2006. The
actual long-term rate of return for the ten years ended December 31, 2006 was 7.05%. Based upon current market conditions, the expected long-term rate of
return for 2007 will remain at 8.25%. A 25 basis point change in the expected long-term rate of return on the plans' assets would have approximately a $1.0
impact on the 2007 pension expense. As of December 31, 2006, the Pension Plans had a $100.5 accumulated actuarial loss that will be expensed over the
average future working lifetime of active participants. For the year ended December 31, 2006, the discount rate to determine the benefit obligation was 5.9%.
The discount rate selected was based on highly rated long-term bond indices and yield curves that match the duration of the plans' benefit obligations. The
bond indices and yield curve analyses include only bonds rated Aa or higher from a reputable rating agency. This rate represents the average of the discount
rates for the Pension Plans weighted by plan liabilities as of December 31, 2006. The discount rate reflects the rate at which the pension benefits could be
effectively settled. A 25 basis point change in the discount rate would have approximately a $0.7 impact on the 2007 pension expense for the Pension Plans.
Additionally, certain of the former Data General foreign subsidiaries and one of our foreign subsidiaries in Japan have defined benefit pension plans. These
foreign pension plans are excluded from this discussion because they do not have a material impact on our consolidated financial position or results of
operations.
We also assumed a post-retirement benefit plan as part of the Data General acquisition that provides certain medical and life insurance benefits for
retired former Data General employees. The plan's assets are invested in common stocks, bonds and cash. The market related value of the plan's assets is equal
to the assets' fair value. The expected long-term rate of return on the plan's assets for the year ended December 31, 2006 was 8.25%. The actual long-term rate
of return for the ten years ended December 31, 2006 was 7.05%. Based on current capital market conditions, the expected long-term rate of return for 2007
will remain at 8.25%. A 25 basis point change in the expected long-term rate of return on the plan's assets has minimal impact on our benefit expense. As of
December 31, 2006, the plan had $0.4 accumulated actuarial loss that will be recognized over the anticipated remaining years of service for participants. For
the year ended December 31, 2006, the discount rate to determine the benefit obligation was 5.9%. The discount rate selected was based on highly rated long-
term bond indices and yield curves that match the duration of the plan's benefit obligations. The bond indices and yield curve analyses include only bonds
rated Aa or higher from a reputable rating agency. A 25 basis point change in the discount rate has a minimal impact on the expense.
Critical Accounting Policies
Our consolidated financial statements are based on the selection and application of generally accepted accounting principles which require us to make
estimates and assumptions about future events that affect the amounts reported in our financial statements and the accompanying notes. Future events and
their effects cannot be determined with certainty. Therefore, the determination of estimates requires the exercise of judgment. Actual results could differ from
those estimates, and any such differences may be material to our financial statements. We believe that the policies set forth below may involve a higher degree
of judgment and complexity in their application than our other accounting policies and represent the critical accounting policies used in the preparation of our
financial statements. If different assumptions or conditions were to prevail, the results could be materially different from our reported results. Our significant
accounting policies are presented within Note A to our Consolidated Financial Statements.
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