Analyzing and Interpreting Restructuring Costs and Effects Hewlett-Packard Inc. reports the following footnote disclosure (excerpted) in its 2015 10-K relating to its restructuring program.

Fiscal 2015 Restructuring Plan In connection with the Separation, on September 14, 2015, HP’s Board of Directors approved a cost saving and investment proposal which includes a restructuring plan

(the “2015 Plan”) which will be implemented through fiscal 2018. As part of the 2015 Plan, HP expects up to approximately 33,300 employees to exit the company by the end of 2018. These workforce reductions are primarily associated with the ES segment. The changes to the workforce will vary by country, based on local legal requirements and consultations with employee works councils and other employee representatives, as appropriate. HP estimates that it will incur aggregate pre-tax charges through fiscal 2018 of approximately $2.9 billion in connection with the 2015 Plan, of which the estimated cost for HP Inc. is approximately

$280 million. Total estimated charges as a result of workforce reductions are approximately

$2.4 billion and total estimated charges for real estate consolidation are approximately $506 million.

Fiscal 2012 Restructuring Plan On May 23, 2012, HP adopted a multi-year restructuring plan (the

“2012 Plan”) designed to simplify business processes, accelerate innovation and deliver better results for customers, employees and stockholders. As of October 31, 2015 HP eliminated 55,800 positions in connection with the 2012 Plan, with a portion of those employees exiting the company as part of voluntary enhanced early retirement (“EER”) programs in the U.S. and in certain other countries. HP recognized

$5.5 billion in total aggregate charges in connection with the 2012 Plan, with $4.9 billion related to workforce reductions, including the EER programs, and $589 million related to infrastructure, including data center and real estate consolidation and other items. The severance and infrastructure related cash payments associated with the 2012 Plan are expected to be paid out through fiscal 2021. As of October 31, 2015, the 2012 Plan is considered completed. HP does not expect any additional charges to this plan.

Other Plans Restructuring plans initiated by HP in fiscal 2008 and 2010 were substantially completed as of October 31, 2015. Severance and infrastructure related cash payments associated with the other plans are expected to be paid out through fiscal 2019.

$ millions Balance, October 31, 2014 Charges Cash Payments Other Adjustments

& Non-cash Settlements Balance, October 31, 2015 Fiscal 2015 Plan Severance. . . . . . . . . . . . . . . . . . $ — $390 $ — $ —$390 Infrastructure and other . . . . . . . — 1 (1) — —

Total 2015 Plan . . . . . . . . . . . . . . — 391 (1) — 390 Fiscal 2012 Plan Severance and EER . . . . . . . . . . 955 566 (1,101) (78) 342 Infrastructure and other . . . . . . . 98 74 (120) (4) 48 Total 2012 Plan . . . . . . . . . . . . . . 1,053 640 (1,221) (82) 390 Other plans Severance. . . . . . . . . . . . . . . . . . 7 (4) (1) (1) 1 Infrastructure. . . . . . . . . . . . . . . . 54 (10) (20) — 24 Total other plans . . . . . . . . . . . . . 61 (14) (21) (1) 25 Total restructuring plans. . . . . . . . . $1,114 $1,017 $(1,243) $(83) $805 Reflected in consolidated balance sheets:

Accrued restructuring. . . . . . . . . . . $ 898 $689 Other liabilities . . . . . . . . . . . . . . . . $ 216 $116 Required

a. Briefly describe the company’s 2015 restructuring program. Provide two examples of common noncash charges associated with corporate restructuring activities.

b. Using the financial statement effects template, show the effects on financial statements of the (1) 2015 restructuring charge of $1,017 million, and (2) 2015 cash payment of $1,243 million.

c. Assume that instead of accurately estimating the anticipated restructuring charge in 2015, the company overestimated them by $30 million. How would this overestimation affect financial statements in (1) 2015, and (2) 2016 when severance costs are paid in cash?

d. The company reports that the total charges related to the 2015 restructuring plan will amount to $2.9 billion. What is the effect on the 2015 income statement from this restructuring? Why do investors care to know the total charge if it does not impact current-period earnings?