Intel 2008 Annual Report Download - page 75

Table of Contents
INTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Fiscal Year 2008
In the first quarter of 2008, we adopted SFAS No. 157, “Fair Value Measurements” (SFAS No. 157), for all financial assets
and financial liabilities, and for all non-financial assets and non-financial liabilities recognized or disclosed at fair value in the
financial statements on a recurring basis (at least annually). SFAS No. 157 defines fair value, establishes a framework for
measuring fair value, and enhances fair value measurement disclosure. The adoption of SFAS No. 157 did not have a
significant impact on our consolidated financial statements, and the resulting fair values calculated under SFAS No. 157 after
adoption were not significantly different from the fair values that would have been calculated under previous guidance. For
further details on our fair value measurements, see “Note 3: Fair Value.”
In February 2008, the FASB issued FASB Staff Position (FSP) 157-1, “Application of FASB Statement No. 157 to FASB
Statement No. 13 and Other Accounting Pronouncements That Address Fair Value Measurements for Purposes of Lease
Classification or Measurement under Statement 13” (FSP 157-1), and FSP 157-2, “Effective Date of FASB Statement No.
157” (FSP 157-2). FSP 157-1 amends SFAS No. 157 to remove certain leasing transactions from its scope and was effective
upon initial adoption of SFAS No. 157. FSP 157-2 delays the effective date of SFAS No. 157 for all non-financial assets and
non-financial liabilities (for further details, see “Recent Accounting Pronouncements” below).
In October 2008, the FASB issued FSP 157-3, “Determining the Fair Value of a Financial Asset When the Market for That
Asset Is Not Active” (FSP 157-3). FSP 157-3 clarifies the application of SFAS No. 157 in a market that is not active, and
addresses application issues such as the use of internal assumptions when relevant observable data does not exist, the use of
observable market information when the market is not active, and the use of market quotes when assessing the relevance of
observable and unobservable data. FSP 157-3 is effective for all periods presented in accordance with SFAS No. 157. The
adoption of FSP 157-3 did not have a significant impact on our consolidated financial statements or the fair values of our
financial assets and liabilities.
In the first quarter of 2008, we adopted SFAS No. 159. SFAS No. 159 permits companies to choose to measure certain
financial instruments and other items at fair value using an instrument-by-instrument election. The standard requires
unrealized gains and losses to be reported in earnings for items measured using the fair value option. For further discussion,
see “Note 3: Fair Value.”
SFAS No. 159 also requires cash flows from purchases, sales, and maturities of trading securities to be classified based on the
nature and purpose for which the securities were acquired. We assessed the nature and purpose of our trading assets and
determined that our marketable debt instruments will be classified on the statement of cash flows as investing activities, as
they are held with the purpose of generating returns. Our equity securities offsetting deferred compensation will continue to be
classified as operating activities, as they are maintained to offset changes in liabilities related to the equity market risk of
certain deferred compensation arrangements. SFAS No. 159 does not allow for retrospective application to periods prior to
fiscal year 2008; therefore, all trading asset activity for prior periods will continue to be presented as operating activities on the
statement of cash flows.
Staff Accounting Bulletin No. 110 (SAB 110) issued by the U.S. Securities and Exchange Commission (SEC) was effective
for us beginning in the first quarter of 2008. SAB 110 amends the SEC’s views
discussed in Staff Accounting Bulletin No. 107
(SAB 107) regarding the use of the simplified method in developing estimates of the expected lives of share options in
accordance with SFAS No. 123(R). The amendment, in part, allowed the continued use, subject to specific criteria, of the
simplified method in estimating the expected lives of share options granted after December 31, 2007. We will continue to use
the simplified method until we have the historical data necessary to provide reasonable estimates of expected lives in
accordance with SAB 107, as amended by SAB 110.
Recent Accounting Pronouncements
In December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations” (SFAS No. 141(R)). Under
SFAS No. 141(R), an entity is required to recognize the assets acquired, liabilities assumed, contractual contingencies, and
contingent consideration at their fair value on the acquisition date. It further requires that acquisition-related costs be
recognized separately from the acquisition and expensed as incurred, restructuring costs generally be expensed in periods
subsequent to the acquisition date, and changes in accounting for deferred tax asset valuation allowances and acquired income
tax uncertainties after the measurement period impact income tax expense. In addition, acquired in-process research and
development is capitalized as an intangible asset and amortized over its estimated useful life. The adoption of SFAS No. 141
(R) will change our accounting treatment for business combinations on a prospective basis beginning in the first quarter of
fiscal year 2009.