Intel 2007 Annual Report Download - page 35

Table of Contents
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION (Continued)
Long
-Lived Assets
We assess the impairment of long-lived assets when events or changes in circumstances indicate that the carrying value of the
assets or the asset grouping may not be recoverable. Factors that we consider in deciding when to perform an impairment
review include significant under-performance of a business or product line in relation to expectations, significant negative
industry or economic trends, and significant changes or planned changes in our use of the assets. Recoverability of assets that
will continue to be used in our operations is measured by comparing the carrying amount of the asset grouping to our estimate
of the related total future undiscounted net cash flows. If an asset grouping’s carrying value is not recoverable through the
related undiscounted cash flows, the asset grouping is considered to be impaired. The impairment is measured by comparing
the difference between the asset grouping’s carrying amount and its fair value, based on the best information available,
including market prices or discounted cash flow analysis.
Impairments of long-lived assets are determined for groups of assets related to the lowest level of identifiable independent
cash flows. Due to our asset usage model and the interchangeable nature of our semiconductor manufacturing capacity, we
must make subjective judgments in determining the independent cash flows that can be related to specific asset groupings. In
addition, as we make manufacturing process conversions and other factory planning decisions, we must make subjective
judgments regarding the remaining useful lives of assets, primarily process
-specific semiconductor manufacturing tools and
building improvements. When we determine that the useful lives of assets are shorter than we had originally estimated, we
accelerate the rate of depreciation over the assets’ new, shorter useful lives. Over the past 12 quarters, including the fourth
quarter of 2007, impairments and accelerated depreciation of long-lived assets have ranged between $1 million and
$320 million per quarter. This range includes restructuring charges for asset impairments between zero and $317 million per
quarter.
Income Taxes
We must make certain estimates and judgments in determining income tax expense for financial statement purposes. These
estimates and judgments occur in the calculation of tax credits, benefits, and deductions, and in the calculation of certain tax
assets and liabilities, which arise from differences in the timing of recognition of revenue and expense for tax and financial
statement purposes, as well as the interest and penalties related to these uncertain tax positions. Significant changes to these
estimates may result in an increase or decrease to our tax provision in a subsequent period.
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 provision for taxes by recording a valuation allowance against the deferred tax assets that we estimate will not
ultimately be recoverable. We believe that we will ultimately recover a substantial majority of the deferred tax assets recorded
on our consolidated balance sheets. However, should there be a change in our ability to recover our deferred tax assets, our tax
provision would increase in the period in which we determined that the recovery was not likely.
The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax regulations. In the
first quarter of 2007, we adopted Financial Accounting Standards Board (FASB) Interpretation No. 48, “Accounting for
Uncertainty in Income Taxes—an interpretation of SFAS No. 109” (FIN 48), and related guidance (see “Note 17: Taxes” in
Part II, Item 8 of this Form 10-K). As a result of the implementation of FIN 48, we recognize liabilities for uncertain tax
positions based on the two-step process prescribed in the interpretation. The first step is to evaluate the tax position for
recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be
sustained on audit, including resolution of related appeals or litigation processes, if any. The second step requires us to
estimate and measure the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate
settlement. It is inherently difficult and subjective to estimate such amounts, as we have to determine the probability of various
possible outcomes. We reevaluate these uncertain tax positions on a quarterly basis. This evaluation is based on factors
including, but not limited to, changes in facts or circumstances, changes in tax law, effectively settled issues under audit, and
new audit activity. Such a change in recognition or measurement would result in the recognition of a tax benefit or an
additional charge to the tax provision.
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