AMD 2014 Annual Report Download - page 78

charges are recorded upon approval of a formal management plan and are included in the operating results of the
period in which such plan is approved and the expense becomes estimable. To estimate restructuring charges,
management utilizes assumptions of the number of employees that would be involuntarily terminated and of
future costs to operate and eventually vacate duplicate facilities. Severance and other employee separation costs
are accrued when it is probable that benefits will be paid and the amount is reasonably estimable. The rates used
in determining severance accruals are based on the Company’s policies and practices and negotiated settlements.
Cash Equivalents. Cash equivalents consist of financial instruments that are readily convertible into cash
and have original maturities of three months or less at the time of purchase.
Investments in Certain Debt and Equity Securities. The Company classifies its investments in debt and
marketable equity securities at the date of acquisition as available-for-sale. Available-for-sale securities are
reported at fair value with the related unrealized gains and losses included, net of tax, in accumulated other
comprehensive loss, a component of stockholders’ equity. Realized gains and losses and declines in the value of
available-for-sale securities determined to be other than temporary are included in other income (expense), net.
The cost of securities sold is determined based on the specific identification method.
The Company classifies investments in debt securities with maturities of more than three months at the time
of purchase as marketable securities on its consolidated balance sheet. Classification of these securities as current
is based on the Company’s intent and belief in its ability to sell these securities and use the proceeds from sale in
operations within 12 months.
Derivative Financial Instruments. The Company maintains a foreign currency hedging strategy which
uses derivative financial instruments to mitigate the risks associated with changes in foreign currency exchange
rates. This strategy takes into consideration all of the Company’s consolidated exposures. The Company does not
use derivative financial instruments for trading or speculative purposes.
In applying its strategy, the Company used foreign currency forward contracts to hedge certain forecasted
expenses denominated in foreign currencies. The Company designated these contracts as cash flow hedges of
forecasted expenses, to the extent eligible under the accounting rules, and evaluates hedge effectiveness
prospectively and retrospectively. As such, the effective portion of the gain or loss on these contracts is reported
as a component of accumulated other comprehensive loss and reclassified to earnings in the same line item as the
associated forecasted transaction and in the same period during which the hedged transaction affects earnings.
Any ineffective portion is immediately recorded in earnings.
The Company also uses, from time to time, foreign currency forward contracts to economically hedge
recognized foreign currency exposures on the balance sheets of various subsidiaries, primarily those denominated
in Canadian dollars. The Company does not designate these forward contracts as hedging instruments.
Accordingly, the gain or loss associated with these contracts is immediately recorded in earnings.
Property, Plant and Equipment. Property, plant and equipment are stated at cost. Depreciation and
amortization are provided on a straight-line basis over the estimated useful lives of the assets for financial
reporting purposes. Estimated useful lives for financial reporting purposes are as follows: equipment, two to six
years; buildings and building improvements, up to 40 years; and leasehold improvements, measured by the
shorter of the remaining terms of the leases or the estimated useful economic lives of the improvements.
Product Warranties. The Company generally warrants that its products sold to its customers will conform
to the Company’s approved specifications and be free from defects in material and workmanship under normal
use and service for one year. Subject to certain exceptions, the Company also offers a three-year limited warranty
to end users for only those CPU and AMD APU A-Series products that are commonly referred to as “processors
in a box” for PC workstation products. The Company has also offered extended limited warranties to certain
customers of “tray” microprocessor products and/or workstation graphics products who have written agreements
with the Company and target their computer systems at the commercial and/or embedded markets. The Company
accrues warranty costs at the time of sale of warranted products.
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