SanDisk 2013 Annual Report Download - page 175

SANDISK CORPORATION
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 the State of Delaware on June 1, 1988. The Company designs, develops,
markets and manufactures data storage solutions in a variety of form factors using its flash memory,
controller and firmware technologies. 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. All fiscal
years presented consisted of 52 weeks. Certain prior period amounts have been reclassified in the financial
statements and footnotes to conform to the current period presentation, including line items within current
assets and property and equipment in the Consolidated Balance Sheets and Note 4, ‘‘Balance Sheet
Information,’’ as well as cash flows from operating activities in the Consolidated Statement of Cash Flows.
Beginning in the first quarter of fiscal year 2013, the Company reports only total revenue, which includes
product revenue and license and royalty revenue. For accounting and disclosure purposes, the exchange
rate used to convert Japanese yen to the United States (‘‘U.S.’’) dollar for fiscal years ended December 29,
2013, December 30, 2012 and January 1, 2012 was 104.94, 85.99 and 77.17, respectively. Throughout the
Notes to Consolidated Financial Statements, unless otherwise indicated, references to Net income refer to
Net income 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 Consolidated Financial Statements in conformity with U.S.
generally accepted accounting principles (‘‘GAAP’’) requires management to make estimates and
assumptions that affect the amounts reported in the Consolidated Financial Statements and accompanying
notes. The estimates and judgments affect the reported amounts of assets, liabilities, revenue, 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,
allowance for doubtful accounts, inventories and inventory reserves, valuation and impairments of
marketable securities and investments, valuation and impairments of goodwill and long-lived assets,
income taxes, warranty obligations, restructurings, 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 value of assets and liabilities when those values are not readily apparent from other
sources. Actual results could materially differ from these estimates.
Revenue Recognition, Sales Returns and Allowances and Sales Incentive Programs. The Company
recognizes revenue 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 or transfer of title 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
revenue and related costs of these transactions are deferred until the retailers or distributors sell-through
the merchandise to their end customer or their rights of return expire. Estimated sales returns are
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