AMD 1996 Annual Report Download - page 227

NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
FISCAL YEAR.
The Company uses a 52- to 53-week fiscal year ending on the last Sunday in
December, which resulted in a 52-week year ended December 29, 1996. This
compares with a 53-week fiscal year for 1995 and a 52-week fiscal year for 1994,
which ended on December 31 and 25, respectively.
PRINCIPLES OF CONSOLIDATION
The Consolidated Financial Statements include the accounts of the Company and
its subsidiaries. Upon consolidation, all significant intercompany accounts and
transactions are eliminated. Also included in the financial statements of the
Company, under the equity method of accounting, is the Company's 49.95 percent
investment in Fujitsu AMD Semiconductor Limited (FASL).
FOREIGN CURRENCY TRANSLATION
The U.S. dollar is the functional currency for the Company's wholly owned
foreign subsidiaries. Translation adjustments, resulting from the process of
translating foreign currency financial statements into U.S. dollars, are
included in operations. The functional currency of the Company's unconsolidated
joint venture is the Japanese yen. The translation adjustment relating to the
translation of these statements was approximately $28 million and $6 million at
December 29, 1996 and December 31, 1995, respectively, and is included in
stockholders' equity.
CASH EQUIVALENTS
Cash equivalents consist of financial instruments which are readily convertible
to cash and have original maturities of three months or less at the time of
acquisition.
INVESTMENTS
The Company classifies its marketable debt and equity securities into held-to-
maturity and available-for-sale categories in accordance with the provisions of
the Statement of Financial Accounting Standards No. 115 (SFAS No. 115),
"Accounting for Certain Investments in Debt and Equity Securities." In
accordance with the FASB staff Special Report, "A Guide to Implementation of
Statement 115 on Accounting for Certain Investments in Debt and Equity
Securities," the Company chose to reclassify, as of December 31, 1995, all cash
equivalents and short-term investments that were classified as held-to-maturity
at that time from held-to-maturity to available-for-sale. Securities classified
as available-for-sale are reported at fair market value with the related
unrealized gains and losses included in retained earnings. Realized gains and
losses and declines in value of securities judged to be other than temporary are
included in interest income and other, net. Interest and dividends on all
securities are included in interest income and other, net.
Investments with maturities between three and twelve months are considered
short-term investments. Short-term investments consist of money market auction
preferred stocks and debt securities such as commercial paper, time deposits,
certificates of deposit, bankers' acceptances, and marketable direct obligations
of the United States Treasury.
FOREIGN EXCHANGE FORWARD CONTRACTS
Foreign exchange forward contracts are used to hedge the Company's net monetary
asset positions in its foreign subsidiaries and the Company's liabilities for
products purchased from FASL. Realized gains and losses from these hedges are
included in operations. Premiums and discounts, if any, are amortized over the
life of the contract and included in operations.
INTEREST RATE SWAPS
The Company enters into interest rate swaps primarily to reduce its interest
rate exposure by changing a portion of the Company's interest rate exposure from
a floating rate to a fixed rate basis. The differential between fixed and
floating rates to be paid or received is accrued and recognized as an adjustment
to interest expense. Accordingly, the related amount payable to or receivable
from counterparties is included in other current assets or accrued liabilities.
INVENTORIES
Inventories are stated principally at standard cost adjusted to approximate the
lower of cost (first-in, first-out method) or market (net realizable value).
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Source: ADVANCED MICRO DEVIC, 10-K, March 20, 1997