AMD 2009 Annual Report Download - page 120

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NOTE 11: Accounting Change—Convertible Debt Instruments
In the first quarter of 2009, the Company adopted the new guidance for accounting for convertible debt that
may be fully or partially settled in cash upon conversion, as codified principally in ASC 470 and modified its
accounting for its 6.00% Notes. To retrospectively apply this new guidance, the proceeds from the issuance of
the Company’s 6.00% Notes were allocated between a liability (issued at a discount) and equity in a manner that
reflects interest expense at the market interest rate for similar nonconvertible debt as of the original issuance date
of the 6.00% Notes. The debt discount is being accreted from issuance through April 2015, the period the 6.00%
Notes are expected to be outstanding, with the accretion recorded as additional non-cash interest expense. The
equity component is included in the paid-in-capital portion of stockholders’ equity on the Company’s
consolidated balance sheet. The initial value of the equity component ($259 million), which reflects the equity
conversion feature of the 6.00% Notes, is equal to the initial debt discount.
During 2008, the Company repurchased $60 million in principal value of its 6.00% Notes in an open market
transaction for approximately $21 million and recognized a gain of approximately $34 million after giving effect
to the retrospective application of the change in accounting.
During 2009, the Company repurchased $344 million in principal value of its 6.00% Notes in open market
transactions for approximately $161 million and recognized a gain of approximately $174 million. The Company
also adjusted the carrying value of the equity component by $27 million as a result of these repurchases.
The effect of applying the provisions of the new guidance in 2009 was (i) an increase in non-cash interest
expense of approximately $25 million, which represents accretion of the unamortized debt discount associated
with the 6.00% Notes for 2009, and (ii) a net decrease in other income (expense) of $6 million, which represents
the difference in accounting for the gain on the debt repurchase under prior accounting compared with
accounting pursuant to the new guidance.
Information related to equity and debt components:
December 26,
2009
December 27,
2008
(In millions)
Carrying amount of the equity component ................ $ 228 $ 255
Principal amount of the 6.00% Notes .................... 1,796 2,140
Unamortized discount(1) ............................... (155) (212)
Net carrying amount ................................. $1,641 $1,928
(1) As of December 26, 2009, the remaining period over which the unamortized discount will be amortized is
64 months.
Information related to interest rates and expense
(Millions except percentages):
Year Ended
December 26
2009
December 27
2008
December 27
2007
Effective interest rate .............................. 8% 8% 8%
Interest cost related to contractual interest coupon ....... $117 $132 $88
Interest cost related to amortization of the discount ...... $ 25 $ 25 $15
112