AMD 2009 Annual Report Download - page 95

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Stock-Based Compensation. The Company estimates stock-based compensation cost for stock options at
the grant date based on the award’s fair-value as calculated by the lattice-binomial option-pricing model. For
restricted stock units and awards, fair value is based on the closing price of the Company’s common stock on the
grant date. The expense is recognized using the single option method which is ratable on a straight-line basis
over the requisite service period.
The application of the lattice-binomial option-pricing model requires the use of extensive actual employee
exercise behavior data and the use of a number of complex assumptions including expected volatility of the
Company’s common stock, risk-free interest rate, and expected dividends. Significant changes in any of these
assumptions could materially affect the fair value of stock options granted in the future.
Forfeiture rates are estimated at the time of grant and revised, if necessary, in subsequent periods if actual
forfeitures differ from those estimates in order to derive the Company’s best estimate of awards ultimately
expected to vest.
Recently Adopted Accounting Standards
Noncontrolling Interest. In December 2007, the Financial Accounting Standards Board (FASB) issued
new guidance on the accounting for and presentation of noncontrolling interests in consolidated financial
statements. This guidance requires that noncontrolling interests in subsidiaries be reported as a component of
stockholders’ equity in the controlling interest’s balance sheet. However, securities of an issuer that are
redeemable at the option of the holder or outside the control of the issuer continue to be classified outside
stockholders’ equity. This guidance also requires that earnings or losses attributed to the noncontrolling interests
be reported as part of consolidated earnings and not as a separate component of income or expense, and requires
disclosure of the attribution of consolidated earnings to the controlling and noncontrolling interests on the face of
the consolidated statement of operations. The Company adopted this guidance at the beginning of its fiscal year
2009. Amounts previously presented as minority interest in consolidated subsidiaries is now presented in net
income (loss) attributable to non-controlling interest in the statements of operations. The Company accounted for
the noncontrolling interest held by Advanced Technology Investment Company LLC (ATIC) in GF in
accordance with this new accounting standard. Since the preferred securities issued by GF to ATIC can be put to
AMD in limited circumstances, ATIC’s noncontrolling interest was, accordingly, not reported as a component of
stockholders’ equity in the consolidated balance sheet. Additionally, the contributions that were made by
Leipziger Messe Gesellschaft GmbH (Leipziger Messe), one of the unaffiliated limited partners in AMD Fab 36
Limited Liability Company & Co. KG, that were recorded as noncontrolling interest, were not mandatorily
redeemable, but rather were subject to redemption outside of the control of AMD. Therefore, this noncontrolling
interest is also not reported as a component of stockholders’ equity. (See Note 4, “Noncontrolling interest”).
Convertible Debt Instruments. In May 2008, the FASB issued new guidance on accounting for convertible
debt instruments that may be settled in cash upon conversion. This guidance requires the issuer of such
instruments to separately account for the liability (debt) and equity (conversion option) components of the
instrument in a manner that reflects the issuer’s nonconvertible debt borrowing rate. The effective date of this
guidance is for financial statements issued for fiscal years beginning after December 15, 2008 and interim
periods within those fiscal years, and it does not permit earlier application. However, the transition guidance
requires retrospective application to all periods presented in the Company’s financial statements. (See Note 11,
“Accounting Change—Convertible Debt Instruments”).
NOTE 3: GLOBALFOUNDRIES
On March 2, 2009, the Company consummated the transactions contemplated by the Master Transaction
Agreement among the Company, Advanced Technology Investment Company LLC (ATIC), a limited liability
company established under the laws of the Emirate of Abu Dhabi and wholly owned by the Government of the
Emirate of Abu Dhabi, and West Coast Hitech L.P., an exempted limited partnership organized under the laws of
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