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Dell keeps finance unit at arm's length

The PC maker says it has no plans to bring an off-balance-sheet joint venture onto its books, despite new accounting rules set to take effect this fall.

Dell Computer says it has no plans to bring an off-balance-sheet joint venture onto its books, despite new accounting rules set to take effect this fall.

Dell Financial Services, a venture between the PC maker and commercial finance firm CIT Group, provides leasing and customer financing services for Dell's products. Dell, which holds 70 percent of the partnership's equity, is allocated 70 percent of the partnership's net income, while 30 percent goes to CIT.

Under impending U.S. accounting rules, one of the two companies should have to consolidate the partnership onto to its financial statements, The Wall Street Journal reported Thursday, citing independent accounting specialists.

A Dell reprentative told CNET News.com that because CIT bears the burden of potential losses and risks associated with financing customers, Dell does not believe that it needs to consolidate the partnership and thus has no plans to do so.

"Consolidation is neither appropriate nor necessary," said Dell spokesman T.R. Reid. "We deliver customers. CIT is very good at providing and managing the financial risk. That's what they bring to the partnership."

Moreover, some financial information from Dell Financial Services, such as the venture's purpose, structure and management, have already been incorporated into Dell's quarterly and annual earnings reports, he said.

As for funding assets and debts associated with Dell Financial Services, Reid said, "we have no exposure to those things."

If the partnership were to report net losses, those losses would all be allocated to CIT, according to Dell representatives.

CIT could not be reached for comment.

The uncertainty over the venture could be an indication that recent reform efforts by the Financial Accounting Standards Board--spurred by financial abuses at energy company Enron and elsewhere--may not succeed at achieving all the desired changes to corporate balance sheets, the Journal reported.

Reuters contributed to this story