AMD 2003 Annual Report Download - page 71

Table of Contents
Substantially all of the Company’s marketable debt and equity securities are classified as available-for-sale. These securities are reported at fair market
value with the related unrealized gains and losses included in accumulated other comprehensive income (loss), net of tax, a component of stockholders equity.
Realized gains and losses and declines in the value of securities determined to be other-than-temporary are included in interest income and other, net. The cost of
securities sold is based on the specific identification method.
The Company classifies investments with maturities between three and 12 months as short-term investments. Short-term investments consist of money
market auction rate preferred stocks and debt securities such as commercial paper, corporate notes, certificates of deposit and marketable direct obligations of
United States governmental agencies. Available-for-sale securities with maturities greater than twelve months are classified as short term when they represent
investments of cash that are intended to be used in current operations.
Derivative Financial Instruments. The Company has foreign currency intercompany transactions denominated in yen and euros. Therefore, in the normal
course of business, the Company’s financial position is routinely subjected to market risk associated with foreign currency rate fluctuations. The Company’s
general practice is to ensure that material business exposure to foreign exchange risks are identified, measured and minimized using the most effective and
efficient methods to eliminate or reduce such exposures. To protect against the reduction in value of forecasted yen and euro denominated cash flows resulting
from these transactions, the Company has instituted a foreign currency cash flow hedging program. Under this program, the Company purchases foreign currency
forward contracts and sells or purchases foreign currency option contracts, generally expiring within twelve months, to hedge portions of its forecasted foreign
currency denominated cash flows. These foreign currency contracts are carried on the Company’s balance sheet at fair value with the effective portion of the
contracts’ gain or loss initially recorded in accumulated other comprehensive income (loss) and subsequently recognized in operations in the same period the
hedged forecasted transaction affects operations. Generally, the gain or loss on derivative contracts, when recognized in operations, offsets the gain or loss on the
hedged foreign currency assets, liabilities or firm commitments. As of December 28, 2003, the Company expects to reclassify the amount accumulated in other
comprehensive income (loss) to operations within the next twelve months upon the recognition in operations of the hedged forecasted transactions. The Company
does not use derivatives for speculative or trading purposes.
The effectiveness test for these foreign currency contracts utilized by the Company is the fair value to fair value comparison method. Under this method,
the Company includes the time value portion of the change in value of the currency forward contract in its effectiveness assessment. Any ineffective portions of
the hedges are recognized currently in interest income and other, net.
If a cash flow hedge should be discontinued because it is probable that the original forecasted transaction will not occur, the net gain or loss in
accumulated other comprehensive income (loss) will be reclassified into operations as a component of interest income and other, net.
Premiums paid for foreign currency forward and option contracts are immediately charged to operations.
Property, Plant and Equipment. Property, plant and equipment are stated at cost, except for assets deemed to have been sold as part of the FASL LLC
transaction (see Note 3). Depreciation and amortization are provided on a straight-line basis over the estimated useful lives of the assets for financial reporting
purposes. Estimated useful lives for financial reporting purposes are as follows: machinery and equipment, two to five years; buildings and building
improvements, up to 26 years; and leasehold improvements, the shorter of the remaining terms of the leases or the estimated economic useful lives of the
improvements.
Treasury Stock. The Company accounts for treasury stock acquisitions using the cost method. For reissuance of treasury stock, to the extent that the
reissuance price is more than the cost, the excess is recorded as an increase to Paid in Capital. If the reissuance price is less than the cost, the difference is also
recorded to Paid
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Source: ADVANCED MICRO DEVIC, 10-K, March 09, 2004