AMD 2014 Annual Report Download - page 51

For the annual goodwill impairment analysis in 2014, we determined that the carrying value of the
Computing and Graphics reporting unit exceeded its estimated fair value and accordingly an impairment charge
of $233 million was recorded, which represented the entire goodwill balance within this reporting unit. The
remaining two reporting units’ estimated fair values exceeded their carrying value, ranging from approximately
156% to approximately 209%. In estimating the fair value of our reporting units, we took into consideration the
challenging industry and market trends that existed as of September 28, 2014, the date of the annual goodwill
impairment test for each respective reporting unit.
Based on the results of our annual analysis of goodwill in 2013 and 2012, each reporting unit’s fair value
exceeded its carrying value, indicating that there was no goodwill impairment.
Estimates of fair value for all or our reporting units can be affected by a variety of external and internal
factors. Potential events or circumstance that could reasonably be expected to negatively affect the key
assumptions we used in estimating the fair value of our reporting units include adverse changes in our industry,
increased competition, an inability to successfully introduce new products in the marketplace or to achieve
internal forecasts, and a decline in our stock price. If the estimated fair value of our reporting units declines due
to any of these factors, we may be required to record future goodwill impairment.
Income Taxes. In determining taxable income for financial statement reporting purposes, we must make
certain estimates and judgments. These estimates and judgments are applied in the calculation of certain tax
liabilities and in the determination of the recoverability of deferred tax assets, which arise from temporary
differences between the recognition of assets and liabilities for tax and financial statement reporting purposes.
We must assess the likelihood that we will be able to recover our deferred tax assets. If recovery is not
likely, we must increase our charge to income tax expense, in the form of a valuation allowance, for the deferred
tax assets that we estimate will not ultimately be recoverable. We consider past performance, future expected
taxable income and prudent and feasible tax planning strategies in determining the need for a valuation
allowance.
In addition, the calculation of our tax liabilities involves dealing with uncertainties in the application of
complex tax rules and the potential for future adjustment of our uncertain tax positions by the Internal Revenue
Service or other taxing authority. If our estimates of these taxes are greater or less than actual results, an
additional tax benefit or charge will result. We recognize the interest and penalties related to unrecognized tax
benefits as interest expense and income tax expense, respectively.
Results of Operations
Management, including the Chief Operating Decision Maker, who is our Chief Executive Officer, reviews
and assesses our operating performance using segment net revenue and operating income (loss) before interest,
other income (expense), net, and income taxes. These performance measures include the allocation of expenses
to the operating segments based on management’s judgment. In connection with our continued strategic
transformation, effective July 1, 2014, we realigned our organizational structure. As a result of this
organizational change, we have the following two reportable segments:
• the Computing and Graphics segment, which primarily includes desktop and notebook processors and
chipsets, discrete GPUs and professional graphics; and
• the Enterprise, Embedded and Semi-Custom segment, which primarily includes server and embedded
processors, dense servers, semi-custom SoC products, engineering services and royalties.
Effective October 8, 2014, Dr. Lisa T. Su became our Chief Executive Officer, succeeding Rory P. Read.
This management change did not result in a change in our reportable segments or to the fact that the Chief
Operating Decision Maker is our Chief Executive Officer.
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