Qualcomm 2002 Annual Report Download - page 67

QUALCOMM 2002 ANNUAL REPORT PAGE 65
September 30,
2002 2001
Foreign currency translation $ (79,762) $ (64,537)
Unrealized loss on marketable
securities, net of income taxes (51,187) (159,630)
$(130,949) $(224,167)
STOCK SPLITS
On November 2, 1999, the Company’s Board of Directors declared a four-for-one
stock split of the Company’s common stock and an increase in the number of author-
ized shares of common stock to three billion shares. The stock was distributed on
December 30, 1999 to stockholders of record on December 20, 1999. All references to
per share amounts have been restated to reflect these stock splits.
NET EARNINGS PER COMMON SHARE
Basic earnings per common share are calculated by dividing net income by the
weighted average number of common shares outstanding during the reporting period.
Diluted earnings per common share (diluted EPS) reflect the potential dilutive effect,
calculated using the treasury stock method, of additional common shares that are
issuable upon exercise of outstanding stock options and warrants and the potential
dilutive effect for the period prior to conversion of shares issuable upon conversion of
Trust Convertible Preferred Securities, determined on an if-converted basis, as
follows (in thousands):
Years Ended September 30,
2002 2001 2000
Options 38,442 — 64,802
Trust Convertible Preferred Securities — — 18,114
38,442 — 82,916
The diluted share base for fiscal 2001 excluded the potential dilutive effect of
51,188,000 incremental shares related to outstanding stock options, calculated using
the treasury stock method, due to their anti-dilutive effect as a result of the
Company’s loss before accounting change.
Options outstanding during the years ended September 30, 2002, 2001 and 2000 to
purchase approximately 40,845,000, 14,427,000, and 2,625,000 shares of common
stock, respectively, were not included in the computation of diluted EPS because the
options’ exercise prices were greater than the average market prices of the common
stock during the period and, therefore, the effect would be anti-dilutive. Net income in
the computation of diluted EPS for fiscal 2000 was increased by $7 million, representing
the assumed savings of distributions, net of taxes, on the Trust Convertible Preferred
Securities (Note 7).
FUTURE ACCOUNTING REQUIREMENTS
In June 2001, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards No. 141 (FAS 141), “Business Combinations,” and
No. 142 (FAS 142), “Goodwill and Other Intangible Assets.” FAS 141 supersedes
Accounting Principles Board Opinion (APB) No. 16, “Business Combinations.” The
provisions of FAS 141 (1) require that the purchase method of accounting be used for
all business combinations initiated after June 30, 2001, (2) provide specific criteria for
the initial recognition and measurement of intangible assets apart from goodwill, and
(3) require that unamortized negative goodwill be written off immediately as an
extraordinary gain instead of being deferred and amortized. FAS 141 also requires
that, upon adoption of FAS 142, the Company reclassify the carrying amounts of
certain intangible assets into or out of goodwill, based on certain criteria. FAS 142
supersedes APB 17, “Intangible Assets,” and is effective for fiscal years beginning
after December 15, 2001. FAS 142 primarily addresses the accounting for goodwill
and intangible assets subsequent to their initial recognition. The provisions of FAS
142 (1) prohibit the amortization of goodwill and indefinite-lived intangible assets, (2)
require that goodwill and indefinite-lived intangible assets be tested annually for
impairment (and in interim periods if certain events occur indicating that the carry-
ing value of goodwill and/or indefinite-lived intangible assets may be impaired), (3)
require that reporting units be identified for the purpose of assessing potential
impairments of goodwill, and (4) remove the forty-year limitation on the amortization
period of intangible assets that have finite lives.
FAS 142 requires that goodwill be tested at least annually for impairment using a
two-step process. The first step (Step 1) is to identify a potential impairment and, in
transition, this step must be measured as of the beginning of the fiscal year. However,
a company has six months from the date of adoption to complete this step. If Step 1
indicates potential impairment, the second step of the goodwill impairment test
measures the amount of the impairment loss (measured as of the beginning of the
year of adoption). Any impairment loss resulting from the transitional impairment
tests would be reflected as the cumulative effect of a change in accounting principle
in the first quarter 2003.
The Company will adopt the provisions of FAS 142 in its first quarter of fiscal 2003.
The Company has determined its reporting units and the amounts of goodwill, intan-
gible assets, other assets and liabilities allocable to those reporting units and has
completed its Step 1 analysis. Based on its Step 1 analysis, the adoption of FAS 142
does not have a material impact on the Company’s financial position. The Company
will no longer record goodwill amortization starting in fiscal 2003. The Company
recorded $248 million, $244 million and $141 million in goodwill amortization
expense during fiscal 2002, 2001 and 2000, respectively.
In August 2001, the FASB issued FAS 144, “Accounting for the Impairment or
Disposal of Long-Lived Assets.” FAS 144 replaces FAS 121, “Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of.” The