AMD 2011 Annual Report Download - page 91

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date on which the Company’s ownership in GF, on a fully converted to GF ordinary shares basis, falls below
10%. The Company’s ownership in GF, on a fully diluted basis, fell below 10% in September 2011. Therefore,
the Company will no longer be able to designate a representative to the GF board of directors in September 2013.
Amended Funding Agreement
On December 27, 2010, the Company amended the Funding Agreement to implement the provisions of the
November 24, 2010 letter agreement described above.
Following the GFS contribution and governance changes described above, the Company assessed its ability
to exercise significant influence over GF and considered factors such as its representation on GF’s board of
directors, participation in GF’s policy-making processes, material intra-entity transactions, interchange of
managerial personnel, technological dependency, and the extent of ownership by the Company in relation to
ownership by the other shareholders. Based on the results of its assessment, the Company concluded that it no
longer had the ability to exercise significant influence over GF. Accordingly, as of the first quarter of 2011, the
Company changed its method of accounting for its ownership interest in GF from the equity method to the cost
method of accounting.
Under the cost method of accounting, the Company no longer recognizes any share of GF’s net income or
loss in its consolidated statement of operations. In addition, the Company reviews the carrying value of its
investment in GF for impairment at each reporting period. Impairment indicators, among other factors, include
significant deterioration in GF’s earnings performance or business prospects, significant changes in the market
conditions in which GF operates, and GF’s ability to continue as a going concern.
Funding of GF
During 2011, ATIC contributed $4.4 billion of cash to GF in exchange for GF securities consisting of
4,386,257 Class A Preferred shares. The Company did not participate in the fundings. As a result, its ownership
interest in GF’s Class A Preferred shares decreased from approximately 62% as of December 25, 2010, to
approximately 12% as of December 31, 2011, and as of December 31, 2011, the Company’s ownership interest
in GF was 9% on a fully diluted basis. Since the formation of GF through December 31, 2011, ATIC contributed
an aggregate of $5.6 billion of cash to GF in exchange for GF securities.
Impairment of investment in GF
During the fourth quarter of 2011, the Company identified indicators of impairment, including revised
financial projections received from GF. The fair value of the Company’s GF investment was determined by a
valuation analysis of GF’s Class A Preferred Shares, utilizing the revised financial projections. The Company
concluded the decline in fair value is other than temporary. As a result of the valuation analysis, the Company
recorded a non-cash impairment charge of approximately $209 million, based on the difference between the
carrying value and the fair value of the investment as of December 31, 2011. As of December 31, 2011, the
Company’s investment balance in GF after impairment was $278 million.
Amended Wafer Supply Agreement. Pursuant to the WSA, the Company is required to purchase all of its
microprocessor unit and APU product requirements from GF with limited exceptions. The primary effect of the
amendment was to change the pricing methodology applicable to wafers delivered in 2011 for the Company’s
microprocessors, including APU products. The amendment also modified the Company’s existing commitments
regarding the production of certain graphics processing unit (GPU) and chipset products at GF. Pursuant to the
amendment, GF has committed to provide the Company with, and the Company has committed to purchase, a
fixed number of 45nm and 32nm wafers per quarter in 2011. The Company paid GF a fixed price for 45nm
wafers delivered in 2011. The Company’s price for 32nm wafers varied based on the wafer volumes and
manufacturing yield of such wafers and was based on good die. In addition, the Company also agreed to pay an
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