AMD 2011 Annual Report Download - page 98

Download and view the complete annual report

Please find page 98 of the 2011 AMD annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 140

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140

With the exception of its long-term debt and investment in GF, the Company carries its financial
instruments at fair value. Investments in money market mutual funds, commercial paper, time deposits,
marketable equity securities, corporate bonds, and foreign currency derivative contracts are primarily classified
within Level 1 or Level 2. This is because such financial instruments are valued primarily using quoted market
prices or alternative pricing sources and models utilizing market observable inputs, as provided to the Company
by its brokers. The Company’s Level 1 assets are valued using quoted prices for identical instruments in active
markets.
The Company’s Level 2 short-term investments are valued using broker reports that utilize quoted market
prices for identical or comparable instruments. Brokers gather observable input for all of the Company’s fixed
income securities from a variety of industry data providers and other third-party sources. The Company’s Level 2
long-term investments are valued using broker reports that utilize a third party professional pricing service who
gathers information from multiple market sources and integrates relevant credit information, observed market
movements and sector news into their pricing evaluation. The Company validates, on a sample basis, the derived
prices provided by the brokers by comparing their assessment of the fair values of the Level 2 long term
investments against the fair values of the portfolio balances of another third-party professional’s pricing services,
other than that utilized by the brokers, who use a similar technique as the brokers to derive pricing as described
above. The Company’s foreign currency derivative contracts are classified within Level 2 because the valuation
inputs are based on quoted prices and market observable data of similar instruments in active markets, such as
currency spot and forward rates.
The Company did not have any transfers between Level 1 and Level 2 of the fair value hierarchy.
The ARS investments are classified within Level 3 because they are valued using a discounted cash flow
model. Some of the inputs to this model are unobservable in the market and are significant.
The continuing uncertainties in the credit markets have affected all of the Company’s ARS investments and
auctions for these securities have failed to settle on their respective settlement dates since February 2008. As a
result, reliable Level 1 or Level 2 pricing is not available for these ARS. In light of these developments, the
Company performs its own discounted cash flow analysis to value these ARS. As of December 31, 2011 and
December 25, 2010, the Company’s significant inputs and assumptions used in the discounted cash flow model
to determine the fair value of its ARS, include interest rate, liquidity and credit discounts and the estimated life of
the ARS investments. The outcomes of these activities indicated that the fair value of the ARS remained
relatively flat as of December 31, 2011 when compared to the fair value as of December 25, 2010.
The roll-forward of the financial assets measured at fair value on a recurring basis using significant
unobservable inputs (Level 3) is as follows:
December 31,
2011
December 25,
2010
Auction
Rate Securities
Auction
Rate Securities
UBS
Put Option
(In millions)
Beginning balance ....................... $ 57 $159 $ 2
Redemption at par ....................... (21) (98) —
Gain (loss) included in net income (loss) ..... 2 3 (2)
Change in fair value included in other
comprehensive income (loss) ............ — (7) —
Ending balance ......................... $ 38 $ 57 $—
92