Property, Plant and Equipment. Property, plant and equipment is stated at cost. Additions, improvements and major renewals are capitalized. Maintenance, repairs and minor renewals are expensed as incurred. Depreciation is provided using accelerated methods, principally over 15 to 40 years for buildings and improvements and 3 to 10 years for machinery and equipment. Depreciation of leasehold improvements is provided using the straight-line method over the life of the lease or the asset, whichever is shorter. 

Capitalized Software. In fiscal 2000, hp adopted Statement of Position (SOP) No. 98-1, “Accounting for the Costs of Computer Software Developed or Obtained for Internal Use. ”Historically, internal use software costs were not material. With the adoption of SOP 98-1, hp began capitalizing certain internal and external costs incurred to acquire or create internal use software, principally related to software coding, designing system inter- faces, installation and testing of the software. Capitalized costs are amortized over three years. 

Long-Term Investments. HP’s long-term investments, which are included in long-term investments and other assets in the accompanying Condensed Consolidated Balance Sheet, consist of U.S. government, corporate and other debt securities as well as public and nonpublic corporate equity securities. HP’s equity securities totaled $1.9 bil- lion at October 31, 2000 and $1.4 billion at October 31, 1999. Investments in equity securities are classified as available-for-sale and are carried at estimated fair value, with unrealized gains and losses, net of tax, included in accumulated other comprehensive income as a separate component of stockholders’ equity. Minority equity invest- ments in nonpublic companies are generally carried at cost. Investments accounted for using the equity method are not material. HP monitors these investments for impairment and records appropriate reductions in carrying val- ues when necessary. Investments in debt securities are classified as held-to-maturity and carried at amortized cost. 

Foreign Currency Translation. HP uses the U.S. dollar as its functional currency. Foreign currency assets and liabilities are remeasured into U.S. dollars at end-of-period exchange rates, except for inventory, property, plant and equipment, other assets and deferred revenues, which are remeasured at historical exchange rates. Revenue and expenses are remeasured at average exchange rates in effect during each period, except for those expenses related to balance sheet amounts which are remeasured at historical exchange rates. Gains or losses from foreign currency remeasurement are included in net earnings. 

Comprehensive Income. Comprehensive income includes net earnings as well as other comprehensive income. HP’s other comprehensive income consists of unrealized gains and losses on available-for-sale securities. 

Reclassifications. Certain reclassifications have been made to prior year balances in order to conform to the current year presentation. 

Recent Pronouncements. In June 1998, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities.” This statement establishes accounting and reporting standards for derivative instruments and requires recognition of all derivatives as assets or liabilities in the statement of financial position and measurement of those instruments at fair value. HP adopted the standard on November 1, 2000, and the adoption did not materially impact its consolidated financial statements. 

In December 1999, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin (SAB) No. 101, “Revenue Recognition in Financial Statements.” This bulletin summarizes certain of the SEC’s views in applying accounting principles generally accepted in the United States to revenue recognition in financial statements. Based on the SEC’s latest timeline for implementing SAB 101, hp would be required to comply with the guidelines in the fourth quarter of fiscal year 2001. Accordingly, hp is continuing to evaluate the potential impact that adoption will have on its consolidated financial statements. 

