Dell Computer Company
Founded in 1984 by Michael Dell, Dell offers standards-based computing products and services. The company prides itself in offering top-of-the ?line customer service and technical support. Dell offers both consumers and businesses the opportunity to customize a computing system in order to fit their needs. In fact, Dell was the leading seller in all customer segments in 2003. In addition to offering various workstations, desktops, and laptops, a portion of Dell's revenues comes from Dell Financial Services L.P. that offers financial alternatives to Dell's customers.
Dell's products and services are sold either separately or as part of a bundle package. Dell allocates fees from these bundle packages to the elements based on the relative fair value of each element, which is generally based on the relative list price of each element in the package. When Dell sells extended warranties to its customers, the revenue is deferred equal to the stated price. Revenue is recognized when the products are delivered, not when the sale is made. Revenue from the extended warranties and service contracts are deferred until the service is complete or is recognized over the term of the contract. Dell does not meet the two criteria for revenue recognition until after the sale and with products, not until after the delivery.
In their 10-K filings, Dell presents its income statement using net revenue, gross margin, net operating income, and net income. Dell does not display "total sales" or "total expenses". Also, on their financial statements, they present the line item "income before cumulative effect of change in accounting principle", ...