Basis of Presentation

Computer Sciences Corporation (CSC or the Company) has prepared the interim period unaudited Consolidated Condensed Financial Statements included herein, as of and for the quarters and six months ended October 3, 2014 and September 27, 2013, pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America (GAAP) have been condensed or omitted pursuant to such rules and regulations. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the unaudited Consolidated Condensed Financial Statements and the accompanying notes. It is recommended that these unaudited Consolidated Condensed Financial Statements be read in conjunction with the financial statements and the notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended March 28, 2014 (fiscal 2014). In the opinion of management, the unaudited Consolidated Condensed Financial Statements included herein reflect all adjustments necessary, including those of a normal recurring nature, to present fairly the financial position, the results of operations and the cash flows for such interim periods. The results of operations for such interim periods are not necessarily indicative of the results for the full year ending April 3, 2015 (fiscal 2015).

The Company reports its results based on a fiscal year convention that comprises four thirteen-week quarters. Every fifth year includes an additional week in the first quarter to prevent the fiscal year from moving from an approximate end of March date. As a result, the first quarter of fiscal 2015 was a fourteen week quarter.

During the first quarter of fiscal 2015, the Company changed its accounting policy for the recognition of actuarial gains and losses for its defined benefit pension and other post-employment benefit plans (see Note 2). These changes have been reported through retrospective application of the new accounting methods to all periods presented. As a result, the unaudited Consolidated Condensed Statements of Operations, Comprehensive Income, Cash Flows, and Changes in Equity for the quarter ended September 27, 2013, the Consolidated Condensed Balance Sheet for the year ended March 28, 2014, and all related notes to such financial statements have been recast from those presented in the previously filed Form 10-Q and Form 10-K to reflect this change (see Note 2).

Effective fiscal 2015, the Company changed its inter-company accounting policy. Previously, inter-company transactions between segments were generally reflected as inter-company revenue. Under the new policy, inter-company transactions are now generally treated as cost transfers. The new inter-company policy has been applied retrospectively, adjusting the segment results for all prior periods (see Note 15).

The Company's income from continuing operations, before taxes and noncontrolling interest, and diluted earnings per share (EPS) from continuing operations, included the following adjustments due to changes in estimated profitability on fixed price contracts accounted for under the percentage-of-completion method, for the quarters and six months ended October 3, 2014 and September 27, 2013:



	Quarter Ended						Six Months Ended
(Amounts in millions, except per-share data)	October 3, 2014			September 27, 2013			October 3, 2014			September 27, 2013
Gross favorable	$	43		$	58		$	72		$	75
Gross unfavorable	(7		)	(17		)	(17		)	(26		)
Total net adjustments, before taxes and non-controlling interest	$	36		$	41		$	55		$	49

Impact on diluted EPS from continuing operations	$	0.15		$	0.18		$	0.21		$	0.20

Unbilled recoverable amounts under contracts in progress do not have an allowance for credit losses, and therefore, any adjustments to unbilled recoverable amounts under contracts in progress related to credit quality would be accounted for as a reduction of revenue. Unbilled recoverable amounts under contracts in progress resulting from sales, primarily to the United States (U.S.) and other governments, that are expected to be collected after one year totaled $55 million and $46 million as of October 3, 2014 and March 28, 2014, respectively.

Depreciation expense was $155 million and $324 million for the quarter and six months ended October 3, 2014, respectively, and $165 million and $333 million for the quarter and six months ended September 27, 2013, respectively.