| Schedule of the Impact of New Accounting Standards on Previously Reported Financial Results |
The following tables present the impact of the new accounting standards to the Company's previously reported financial results.
Selected Captions from the Condensed Consolidated Statement of Financial Position | | | | | | | | | | | | | | February 2, 2018 | | As Reported (a) | | Revenue from Contracts with Customers | | As Recast | | (in millions) | Assets | | | | | | Accounts receivable, net | $ | 11,177 |
| | $ | 544 |
| | $ | 11,721 |
| Other current assets | $ | 5,054 |
| | $ | 827 |
| | $ | 5,881 |
| Other non-current assets | $ | 1,862 |
| | $ | 541 |
| | $ | 2,403 |
| Liabilities and Stockholders' Equity | | | | | | Accrued and other | $ | 7,661 |
| | $ | 365 |
| | $ | 8,026 |
| Short-term deferred revenue | $ | 12,024 |
| | $ | (418 | ) | | $ | 11,606 |
| Long-term deferred revenue | $ | 10,223 |
| | $ | (1,013 | ) | | $ | 9,210 |
| Other non-current liabilities | $ | 6,797 |
| | $ | 480 |
| | $ | 7,277 |
| Accumulated deficit | $ | (9,253 | ) | | $ | 2,393 |
| | $ | (6,860 | ) | Non-controlling interests | $ | 5,661 |
| | $ | 105 |
| | $ | 5,766 |
|
____________________ | | (a) | Amounts as reported in the Company's Annual Report on Form 10-K for the fiscal year ended February 2, 2018. |
The above impacts are summarized as follows:
Accounts receivable, net. The adoption of the new revenue standard resulted in an increase to accounts receivable, net primarily due to the following two factors:
| | • | First, the return rights provision, which represents an estimate of expected customer returns, which was previously presented as a reduction of accounts receivable, net, is now being presented outside of accounts receivable, net in two separate balance sheet line items. A liability is recorded in accrued and other for the estimated value of the sales amounts to be returned to the customer, and an asset is recorded in other current assets representing the recoverable cost of the inventory estimated to be returned. |
| | • | Second, the standard provides new guidance regarding transfer of control of goods to the customer. Under these new guidelines, the Company has determined that for certain hardware contracts in the United States, transfer of control and recognition of revenue can occur earlier. This resulted in an increase in accounts receivable, net and a decrease in the in-transit deferral recorded in other current assets. |
Other assets. The adoption of the new revenue standard resulted in an increase in other assets due to capitalization of the costs to obtain a contract, as well as the accounts receivable, net of impacts discussed above.
Deferred revenue. The adoption of the new revenue standard resulted in a decline in deferred revenue due to earlier recognition of revenue for software licenses, and less of the aggregate transaction price being allocated to extended warranty. Deferred revenue was also reduced by the impact of variable consideration (i.e., price concessions, rebates, and refunds). The reduction in deferred revenue was partially offset by an increase resulting from the change in presentation of deferred costs on third-party software offerings, which are reported in other assets, and are either sold on a standalone basis or as an attached component of the Company's hardware offering. The Company previously reported the associated deferred revenue net of these deferred costs in deferred revenue.
Condensed Consolidated Statement of Income (Loss) | | | | | | | | | | | | | | | | | | | | | | | | | | Three Months Ended | | Six Months Ended | | August 4, 2017 | | August 4, 2017 | | As Reported (a) | | Revenue from Contracts with Customers | | As Recast | | As Reported (a) | | Revenue from Contracts with Customers | | As Recast | | (in millions, except per share amounts) | Net revenue: | | | | | | | | | | | | Products | $ | 14,355 |
| | $ | 747 |
| | $ | 15,102 |
| | $ | 27,323 |
| | $ | 1,413 |
| | $ | 28,736 |
| Services | 4,944 |
| | (525 | ) | | 4,419 |
| | 9,792 |
| | (1,007 | ) | | 8,785 |
| Total net revenue | 19,299 |
| | 222 |
| | 19,521 |
| | 37,115 |
| | 406 |
| | 37,521 |
| Cost of net revenue: | | | | | | | | | | | | Products | 12,378 |
| | 397 |
| | 12,775 |
| | 23,837 |
| | 761 |
| | 24,598 |
| Services | 2,112 |
| | (334 | ) | | 1,778 |
| | 4,167 |
| | (669 | ) | | 3,498 |
| Total cost of net revenue | 14,490 |
| | 63 |
| | 14,553 |
| | 28,004 |
| | 92 |
| | 28,096 |
| Gross margin | 4,809 |
| | 159 |
| | 4,968 |
| | 9,111 |
| | 314 |
| | 9,425 |
| Operating expenses: | | | | | | | | | | | | Selling, general, and administrative | 4,695 |
| | (155 | ) | | 4,540 |
| | 9,364 |
| | (228 | ) | | 9,136 |
| Research and development | 1,093 |
| | — |
| | 1,093 |
| | 2,226 |
| | — |
| | 2,226 |
| Total operating expenses | 5,788 |
| | (155 | ) | | 5,633 |
| | 11,590 |
| | (228 | ) | | 11,362 |
| Operating loss | (979 | ) | | 314 |
| | (665 | ) | | (2,479 | ) | | 542 |
| | (1,937 | ) | Interest and other, net | (545 | ) | | — |
| | (545 | ) | | (1,118 | ) | | 1 |
| | (1,117 | ) | Income (loss) before income taxes | (1,524 | ) | | 314 |
| | (1,210 | ) | | (3,597 | ) | | 543 |
| | (3,054 | ) | Income tax provision (benefit) | (546 | ) | | 75 |
| | (471 | ) | | (1,236 | ) | | 124 |
| | (1,112 | ) | Net income (loss) | (978 | ) | | 239 |
| | (739 | ) | | (2,361 | ) | | 419 |
| | (1,942 | ) | Less: Net income (loss) attributable to non-controlling interests | (32 | ) | | 25 |
| | (7 | ) | | (81 | ) | | 42 |
| | (39 | ) | Net income (loss) attributable to Dell Technologies Inc. | $ | (946 | ) | | $ | 214 |
| | $ | (732 | ) | | $ | (2,280 | ) | | $ | 377 |
| | $ | (1,903 | ) | | | | | | | | | | | | | Earnings (loss) per share attributable to Dell Technologies Inc. - basic: | | | | | | | Class V Common Stock - basic | $ | 0.83 |
| | $ | 0.17 |
| | $ | 1.00 |
| | $ | 1.40 |
| | $ | 0.20 |
| | $ | 1.60 |
| DHI Group - basic | $ | (1.97 | ) | | $ | 0.32 |
| | $ | (1.65 | ) | | $ | (4.53 | ) | | $ | 0.59 |
| | $ | (3.94 | ) | | | | | | | | | | | | | Earnings (loss) per share attributable to Dell Technologies Inc. - diluted: | | | | | | | Class V Common Stock - diluted | $ | 0.82 |
| | $ | 0.18 |
| | $ | 1.00 |
| | $ | 1.38 |
| | $ | 0.21 |
| | $ | 1.59 |
| DHI Group - diluted | $ | (1.97 | ) | | $ | 0.31 |
| | $ | (1.66 | ) | | $ | (4.54 | ) | | $ | 0.59 |
| | $ | (3.95 | ) |
____________________ | | (a) | Amounts as reported in the Company's Quarterly Report on Form 10-Q for the quarterly period ended August 4, 2017. |
The above impacts are summarized as follows:
Net revenue. The adoption of the new revenue standard resulted in an increase to net revenue due to earlier revenue recognition than permitted under the previous standard.
Products revenue vs. services revenue. The adoption of the new revenue standard resulted in a change to the classification of products revenue vs. services revenue, due to the following factors:
| | • | Under the new revenue standard, amounts within a contract are now allocated to the product and services performance obligations based on their respective standalone selling prices, which generally increases product revenue and decreases services revenue relative to previously reported results. |
| | • | Further, third-party software licenses were previously recognized in services revenue as the Company could not separate the value of the software license from the associated maintenance agreement. Under the new revenue standard, the license value requires separation and will be recognized in product revenue and the value of the software maintenance will continue to be recognized in services revenue. |
Operating expenses. The adoption of the new revenue standard resulted in a decrease to operating expenses due to the deferral of the incremental direct costs of obtaining a contract.
Selected Captions from the Condensed Consolidated Statement of Cash Flows | | | | | | | | | | | | | | | | | | Six Months Ended | | August 4, 2017 | | As Reported (a) | | Classification of Certain Cash Receipts and Cash Payments | | Statement of Cash Flows, Restricted Cash | | As Recast | | (in millions) | Change in cash from operating activities | $ | 2,056 |
| | $ | 32 |
| | $ | 17 |
| | $ | 2,105 |
| Change in cash from investing activities | $ | (1,290 | ) | | $ | — |
| | $ | — |
| | $ | (1,290 | ) | Change in cash from financing activities | $ | (1,075 | ) | | $ | (32 | ) | | $ | 30 |
| | $ | (1,077 | ) | | | | | | | | | Change in cash, cash equivalents, and restricted cash | $ | (261 | ) | | $ | — |
| | $ | 47 |
| | $ | (214 | ) | Cash, cash equivalents, and restricted cash at beginning of the period | 9,474 |
| | — |
| | 358 |
| | 9,832 |
| Cash, cash equivalents, and restricted cash at end of the period | $ | 9,213 |
| | $ | — |
| | $ | 405 |
| | $ | 9,618 |
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____________________ | | (a) | Amounts as reported in the Company's Quarterly Report on Form 10-Q for the quarterly period ended August 4, 2017. |
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