Hewlett-Packard Co. (HPQ) | Analysis of Investments

Investment Accounting Policy

Cash and Cash Equivalents

Hewlett-Packard classifies investments as cash equivalents if the original maturity of an investment is three months or less. Cash equivalents consist primarily of highly liquid investments in time deposits held in major banks and commercial paper. As of October 31, 2011 and 2010, the carrying value of cash and cash equivalents approximates fair value due to the short period of time to maturity.

Investments

Hewlett-Packard's investments consist principally of time deposits, money market funds, commercial paper, corporate debt, other debt securities, and equity securities of publicly-traded and privately-held companies.

Debt and marketable equity securities are generally considered available-for-sale and are reported at fair value with unrealized gains and losses, net of applicable taxes, recorded in accumulated other comprehensive income, a component of equity. The realized gains and losses for available-for-sale securities are included in other income and expense in the Consolidated Statement of Earnings. Realized gains and losses are calculated based on the specific identification method.

Hewlett-Packard monitors its investment portfolio for impairment on a periodic basis. When the carrying value of an investment in debt securities exceeds its fair value and the decline in value is determined to be an other-than-temporary decline, and when Hewlett-Packard does not intend to sell the debt securities and it is not more likely than not that Hewlett-Packard will be required to sell the debt securities prior to recovery of its amortized cost basis, Hewlett-Packard records an impairment charge to Interest and other, net in the amount of the credit loss and the balance, if any, to other comprehensive income (loss). Hewlett-Packard carries equity investments in privately-held companies at cost or at fair value when Hewlett-Packard recognizes an other-than-temporary impairment charge.

Source: Hewlett-Packard Co., Annual Report

Adjustment to Net Income (Loss): Mark to Market Available-for-sale Securities

Hewlett-Packard Co., adjustment to Net Earnings

	12 months ended	Oct 31, 2011	Oct 31, 2010	Oct 31, 2009	Oct 31, 2008	Oct 31, 2007	Oct 31, 2006
	Net earnings (as reported)
	Add: Net change in unrealized gains (losses) on available-for-sale securities
	Net earnings (adjusted)

Adjusted Ratios: Mark to Market Available-for-sale Securities (Summary)

Hewlett-Packard Co., adjusted ratios

		Oct 31, 2011	Oct 31, 2010	Oct 31, 2009	Oct 31, 2008	Oct 31, 2007	Oct 31, 2006
	Net Profit Margin
	Reported net profit margin	%	%	%	%	%	%
	Adjusted net profit margin	%	%	%	%	%	%
	Return on Equity (ROE)
	Reported ROE	%	%	%	%	%	%
	Adjusted ROE	%	%	%	%	%	%
	Return on Assets (ROA)
	Reported ROA	%	%	%	%	%	%
	Adjusted ROA	%	%	%	%	%	%

Adjusted Net Profit Margin

		Oct 31, 2011	Oct 31, 2010	Oct 31, 2009	Oct 31, 2008	Oct 31, 2007	Oct 31, 2006
	As Reported
	Net earnings (USD $ in millions)
	Net revenue (USD $ in millions)
	Net profit margin1	%	%	%	%	%	%
	Adjusted: Mark to Market Available-for-sale Securities
	Adjusted net earnings (USD $ in millions)
	Net revenue (USD $ in millions)
	Adjusted net profit margin2	%	%	%	%	%	%

2011 Calculations

Adjusted Return On Equity (ROE)

		Oct 31, 2011	Oct 31, 2010	Oct 31, 2009	Oct 31, 2008	Oct 31, 2007	Oct 31, 2006
	As Reported
	Net earnings (USD $ in millions)
	HP stockholders' equity (USD $ in millions)
	ROE1	%	%	%	%	%	%
	Adjusted: Mark to Market Available-for-sale Securities
	Adjusted net earnings (USD $ in millions)
	HP stockholders' equity (USD $ in millions)
	Adjusted ROE2	%	%	%	%	%	%

2011 Calculations

Adjusted Return On Assets (ROA)

		Oct 31, 2011	Oct 31, 2010	Oct 31, 2009	Oct 31, 2008	Oct 31, 2007	Oct 31, 2006
	As Reported
	Net earnings (USD $ in millions)
	Total assets (USD $ in millions)
	ROA1	%	%	%	%	%	%
	Adjusted: Mark to Market Available-for-sale Securities
	Adjusted net earnings (USD $ in millions)
	Total assets (USD $ in millions)
	Adjusted ROA2	%	%	%	%	%	%

2011 Calculations