AMD 2013 Annual Report Download - page 77

Advanced Micro Devices, Inc.
Notes to Consolidated Financial Statements
December 28, 2013, December 29, 2012 and December 31, 2011
NOTE 1: Nature of Operations
Advanced Micro Devices, Inc. is a global semiconductor company with facilities throughout the world.
References herein to AMD or the Company mean Advanced Micro Devices, Inc. and its consolidated
subsidiaries. The Company provides:
(i) x86 microprocessors, as standalone devices or as incorporated as an accelerated processing unit (APU),
chipsets, embedded processors and dense servers; and
(ii) graphics processing units (GPUs), including professional graphics, semi-custom System-on-Chip
(SOC) products, development services and technology for game consoles.
NOTE 2: Summary of Significant Accounting Policies
Fiscal Year. The Company uses a 52 or 53 week fiscal year ending on the last Saturday in December.
Fiscal 2013, 2012 and 2011 ended December 28, 2013, December 29, 2012 and December 31, 2011,
respectively, consisted of 52, 52 and 53 weeks, respectively.
Principles of Consolidation. The consolidated financial statements include the Company’s accounts and
those of its wholly-owned subsidiaries. Upon consolidation, all significant intercompany accounts and
transactions are eliminated.
Use of Estimates. The preparation of consolidated financial statements in conformity with U.S. generally
accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of commitments and contingencies at the date of the
financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual
results are likely to differ from those estimates, and such differences may be material to the financial statements.
Areas where management uses subjective judgment include, but are not limited to, revenue allowances, inventory
valuation, valuation and impairment of goodwill, valuation of investments in marketable securities, deferred
income taxes and restructuring charges.
Revenue Recognition. The Company recognizes revenue from products sold directly to customers,
including original equipment manufacturers (OEMs), when persuasive evidence of an arrangement exists, the
price is fixed or determinable, delivery has occurred and collectability is reasonably assured. Estimates of
product returns, allowances and future price reductions, based on actual historical experience and other known or
anticipated trends and factors, are recorded at the time revenue is recognized. The Company sells to distributors
under terms allowing the majority of distributors certain rights of return and price protection on unsold
merchandise held by them. The distributor agreements, which may be cancelled by either party upon specified
notice, generally contain a provision for the return of those of the Company’s products that the Company has
removed from its price book and that are not more than 12 months older than the manufacturing code date. In
addition, some agreements with distributors may contain standard stock rotation provisions permitting limited
levels of product returns. Therefore, the Company is unable to estimate the product returns and pricing when the
product is sold to the distributors. Accordingly, the Company defers the gross margin resulting from the deferral
of both revenue and related product costs from sales to distributors with agreements that have the aforementioned
terms until the merchandise is resold by the distributors and reports such deferred amounts as “Deferred income
on shipments to distributors” on its consolidated balance sheet. Products are sold to distributors at standard
published prices that are contained in price books that are broadly provided to the Company’s various
distributors. Distributors are then required to pay for these products within the Company’s standard commercial
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