Intel 2009 Annual Report Download - page 35

Table of Contents
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (Continued)
For non-marketable equity investments, the measurement of fair value requires significant judgment and includes quantitative
and qualitative analysis of identified events or circumstances that impact the fair value of the investment, such as:
If the fair value of an investment is below our carrying value, we determine if the investment is other than temporarily
impaired based on our quantitative and qualitative analysis, which includes assessing the severity and duration of the
impairment and the likelihood of recovery before disposal. If the investment is considered to be other than temporarily
impaired, we write down the investment to its fair value. Impairments of non-marketable equity investments were $221
million in 2009. Over the past 12 quarters, including the fourth quarter of 2009, impairments of non-marketable equity
investments ranged from $11 million to $896 million per quarter. This range included impairments of $896 million during the
fourth quarter of 2008, primarily related to a $762 million impairment charge on our investment in Clearwire
Communications, LLC (Clearwire LLC).
IMFT/IMFS
IMFT and IMFS are variable interest entities that are designed to manufacture and sell NAND products to Intel and Micron at
manufacturing cost. We determine the fair value of our investment in IMFT/IMFS using the income approach based on a
weighted average of multiple discounted cash flow scenarios of our NAND Solutions Group business, which requires the use
of unobservable inputs. Unobservable inputs that require us to make our most difficult and subjective judgments are the
estimates for projected revenue and discount rate. Changes in management estimates for these unobservable inputs have the
most significant effect on the fair value determination. We did not have an other-than-temporary impairment on our
investment in IMFT/IMFS in 2009, 2008, or 2007. It is reasonably possible that the estimates used in the fair value
determination could change in the near term, which could result in an impairment of our investment.
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. We measure the
recoverability of assets that will continue to be used in our operations by comparing the carrying value 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 value and its fair value. Fair value is the price that would be
received from selling an asset in an orderly transaction between market participants at the measurement date. Long-lived
assets
such as goodwill; intangible assets; and property, plant and equipment are considered non-financial assets, and are recorded at
fair value only when an impairment charge is recognized.
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 2009, impairments and accelerated depreciation of long-lived assets ranged from $40 million to $300 million per
quarter. For further discussion on these asset impairment charges, see “Note 19: Restructuring and Asset Impairment Charges”
in Part II, Item 8 of this Form 10-K.
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•
the investee
’
s revenue and earnings trends relative to pre
-
defined milestones and overall business prospects;
•
the technological feasibility of the investee
’
s products and technologies;
• the general market conditions in the investee’s industry or geographic area, including adverse regulatory or economic
changes;
• factors related to the investee’s ability to remain in business, such as the investee’
s liquidity, debt ratios, and the rate at
which the investee is using its cash; and
•
the investee
’
s receipt of additional funding at a lower valuation.