SanDisk 2010 Annual Report Download - page 194

Notes to Consolidated Financial Statements
Note 1: Organization and Summary of Significant Accounting Policies
Organization and Nature of Operations. SanDisk Corporation (together with its subsidiaries, the
“Company”) was incorporated in Delaware on June 1, 1988. The Company designs, develops, markets and
manufactures flash storage card products used in a wide variety of consumer electronics products. The Company
operates in one segment, flash memory storage products.
Basis of Presentation. The Company’s fiscal year ends on the Sunday closest to December 31. Fiscal year
2009 consisted of 53 weeks, with the additional week included in the fourth quarter. Fiscal years 2010 and 2008
each consisted of 52 weeks. Certain prior period amounts have been reclassified to conform to the current period
presentation, including the net of tax adjustment for comprehensive income line items and line items within the
net deferred tax asset detail. For accounting and disclosure purposes, the exchange rate at January 2, 2011 and
January 3, 2010 of 81.23 and 92.46, respectively, was used to convert Japanese yen to United States (“U.S.”)
dollars for each respective fiscal year-end. Throughout the Notes to Consolidated Financial Statements, unless
otherwise indicated, the reference to Net income (loss) refers to Net income (loss) attributable to common
stockholders.
Principles of Consolidation. The Consolidated Financial Statements include the accounts of the Company
and its majority-owned subsidiaries. All intercompany balances and transactions have been eliminated.
Non-controlling interest represents the minority shareholders’ proportionate share of the net assets and results of
operations of the Company’s majority-owned subsidiaries. The Consolidated Financial Statements also include
the results of companies acquired by the Company from the date of each acquisition.
Use of Estimates.The preparation of financial statements in conformity with generally accepted accounting
principles in the United States (“U.S. GAAP”) requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes. The estimates and judgments
affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent
liabilities. On an ongoing basis, the Company evaluates its estimates, including those related to customer
programs and incentives, intellectual property claims, product returns, bad debts, inventories, investments, long-
lived assets, income taxes, warranty obligations, restructuring, contingencies, share-based compensation and
litigation. The Company bases its estimates on historical experience and on other assumptions that its
management believes are reasonable under the circumstances. These estimates form the basis for making
judgments about the carrying values of assets and liabilities when those values are not readily apparent from
other sources. Actual results could differ materially from these estimates.
Revenue Recognition, Sales Returns and Allowances and Sales Incentive Programs. The Company
recognizes revenues when the earnings process is complete, as evidenced by an agreement with the customer,
transfer of title and acceptance, if applicable, pricing is fixed or determinable and collectability is reasonably
assured. Revenue is generally recognized at the time of shipment for customers not eligible for price protection
and/or a right of return. Sales made to distributors and retailers are generally under agreements allowing price
protection and/or a right of return and, therefore, the revenues and related costs of these transactions are deferred
until the retailers or distributors sell-through the merchandise to their end customer, or the rights of return expire.
Estimated sales returns are provided for as a reduction to product revenue and were not material for any period
presented in the accompanying Consolidated Financial Statements. The cost of shipping products to customers is
included in cost of product revenues. The Company recognizes expenses related to sales commissions in the
period in which they are earned.
On January 4, 2010, the Company early adopted prospectively new accounting guidance as issued by the
Financial Accounting Standards Board (“FASB”) related to revenue recognition of multiple element
arrangements and revenue arrangements that include software elements. Multiple element arrangements and
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