AMD 2009 Annual Report Download - page 103

2008 Impairment
In the second quarter of 2008, the Company evaluated the viability of its non-core businesses and
determined that it’s Handheld and Digital Television business units were not directly aligned with its core
strategy of computing and graphics market opportunities. Therefore, the Company decided to divest these units
and classify them as discontinued operations in the Company’s financial statements. As a result, the Company
performed an interim impairment test of goodwill and concluded that the carrying amounts of goodwill
associated with its Handheld and Digital Television business units were impaired and recorded an impairment
charge of $799 million, of which $336 million, related to the Handheld business unit, is included in the caption
“Impairment of goodwill and acquired intangible assets” and $463 million, related to the Digital Television
business unit, is included in the caption “Income (loss) from discontinued operations, net of tax” in the
Company’s 2008 consolidated statement of operations. The impairment charges were determined by comparing
the carrying value of goodwill assigned to the reporting units with the implied fair value of the goodwill. The
Company considered both the income and market approaches in determining the implied fair value of the
goodwill and chose the same approach that the Company used during the 2007 impairment analysis, which
required estimates of future operating results and cash flows of each of the reporting units discounted using
estimated discount rates ranging from 18 percent to 32 percent. The estimates of future operating results and cash
flows were principally derived from an updated long-term financial forecast, which was revised as a result of the
challenging economic environment. The decline in the implied fair value of the goodwill and resulting
impairment charge was primarily driven by the estimated proceeds from the expected divestiture of these
business units.
The outcome of the Company’s goodwill impairment analysis indicated that the carrying amount of certain
of its Handheld and Digital Television business unit acquisition-related intangible assets or asset groups may not
be recoverable. The Company determined that the carrying amounts of certain acquisition-related intangible
assets associated with its Handheld and Digital Television business units exceeded their estimated fair values,
and recorded an impairment charge of $77 million, of which $67 million related to the Handheld business unit is
included in the caption “Impairment of goodwill and acquired intangible assets” and $10 million related to the
Digital Television business unit is included in the caption, “Income (loss) from discontinued operations, net of
tax” in its 2008 consolidated statement of operations.
During the fourth quarter of 2008, the Company determined that, based on its ongoing negotiations related
to the divestiture of the Handheld business unit, the discontinued operations classification criteria for this
business unit were no longer met. As a result the Company classified the results of the Handheld business back
into continuing operations. During the first quarter of 2009 the Company sold certain graphics and multimedia
technology assets and intellectual property that were formerly part of the Handheld business unit to Qualcomm.
As of December 27, 2008, these assets were classified as assets held for sale and included in the caption “Prepaid
expenses and other current assets” in the Company’s 2008 consolidated balance sheet. Pursuant to the
Company’s agreement with Qualcomm, the Company retained the AMD Imageon media processor brand and the
right to continue selling the products that were part of the Handheld business unit, and the Company intends to
support the existing Handheld products and customers through the current product lifecycles. The Company does
not intend to develop any new Handheld products or engage new customer programs beyond those already
committed. The lives of the remaining certain intangible assets associated with the Handheld business unit have
been shortened to reflect the Company’s current expectations of their economic usefulness.
In the fourth quarter of 2008, pursuant to the Company’s accounting policy, the Company conducted its
annual impairment test of goodwill. In addition, due to the significant decline in the price of its common stock
and the revised lower revenue forecast for the fourth quarter of 2008, which the Company concluded were
additional impairment indicators, the Company conducted another interim impairment analysis as of
November 22, 2008, the end of its second fiscal month of the fourth quarter. As a result of these analyses, the
Company concluded that the carrying amounts of goodwill assigned to the Graphics and Computing Solutions
segments exceeded their implied fair values and recorded an impairment charge of $622 million, which is
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