AMD 2003 Annual Report Download - page 27

Table of Contents
costs, subleasing assumptions and facility and equipment decommissioning costs resulting from exiting certain facilities. We review remaining restructuring
accruals on a quarterly basis and adjust these accruals when changes in facts and circumstances suggest actual amounts will differ from our estimates. Although
we do not anticipate significant changes, actual costs may be different than our original or revised estimates. These changes in estimates can result in increases or
decreases to our results of operations in future periods and would be presented on the restructuring and other special charges, net, line of our consolidated
operating statements.
Income Taxes. In determining taxable income for financial statement reporting purposes, we must make certain estimates and judgments. These estimates
and judgments are applied in the calculation of certain tax liabilities and in the determination of the recoverability of deferred tax assets, which arise from
temporary differences between the recognition of assets and liabilities for tax and financial statement reporting purposes.
We must assess the likelihood that we will be able to recover our deferred tax assets. If recovery is not likely, we must increase our provision for taxes by
recording a charge to income tax expense, in the form of a valuation allowance, for the deferred tax assets that we estimate will not ultimately be recoverable. We
consider past performance, future expected taxable income and prudent and feasible tax planning strategies in determining the need for a valuation allowance. In
fiscal 2002, we recorded a valuation allowance against all of our U.S. deferred tax assets, net of deferred tax liabilities, based on past performance and the
likelihood of realization of our deferred tax assets at the time. In fiscal 2003, we continued to provide a valuation allowance against all of our U.S. deferred tax
assets, net of deferred tax liabilities. If we later determine that it is more likely than not that the net deferred tax assets will be realized, an appropriate amount of
the previously provided valuation allowance will be reversed, resulting in a benefit to our earnings. Such benefits would be recorded on the income tax provision
(benefit) line of our statement of operations.
In addition, the calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax rules and the potential for future
adjustment by the Internal Revenue Service or other taxing jurisdiction. If our estimates of these taxes are greater or less than actual results, an additional tax
benefit or charge will result.
Commitments and Contingencies. From time to time we are a defendant or plaintiff in various legal actions that arise in the normal course of business.
We are also a party to environmental matters, including local, regional, state and federal government cleanup activities at or near locations where we currently or
have in the past conducted our business. We are also a guarantor of various third-party obligations and commitments. We are required to assess the likelihood of
any adverse judgments or outcomes to these matters as well as potential ranges of probable losses. A determination of the amount of reserves required for these
commitments and contingencies, if any, that would be charged to earnings includes assessing the probability of adverse outcomes and estimating the amount of
potential losses. The required reserves may change in the future due to new developments in each matter or changes in circumstances, such as a change in
settlement strategy. Changes in required reserves could increase or decrease our earnings in the period the changes are made.
Results Of Operations
As discussed above in the section entitled, “Developments in 2003,” on page 1, effective June 30, 2003, we and Fujitsu formed FASL LLC. As a result of
the transaction, we began consolidating FASL LLC’s results of operations on June 30, 2003. Prior to June 30, 2003, we accounted for our share of the
Manufacturing Joint Venture’s operating results under the equity method. As FASL LLC did not exist prior to June 30, 2003, the results of our operations for
periods prior to the third quarter of 2003 do not include the consolidation of FASL LLC’s results of operations. Accordingly, our operating results for the year
ended December 28, 2003 are not fully comparable with our results for prior periods. As we have a 60 percent controlling interest in FASL LLC, Fujitsu’s 40
percent share in the net income (loss) of FASL LLC is reflected as a minority interest adjustment to our consolidated financial statements. This minority interest
adjustment will not correspond to Memory Products segment operating income (loss) because Memory Products segment operating income (loss) includes
operations incremental to those of FASL LLC. In addition, the minority interest calculation is based on FASL LLC’s net income (loss) rather than operating
income (loss).
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Source: ADVANCED MICRO DEVIC, 10-K, March 09, 2004