SanDisk 2013 Annual Report Download - page 177

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
merits of the position. The tax benefits recognized in the financial statements from such positions are then
measured based on the largest benefit that has a greater than 50% likelihood of being realized upon
settlement.
Foreign Currency. The Company determines the functional currency for its parent company and each of
its subsidiaries by reviewing the currencies in which their respective operating activities occur. Transaction
gains and losses arising from activities in other than the applicable functional currency are calculated using
average exchange rates for the applicable period and reported in net income as a non-operating item in
each period. Non-monetary balance sheet items denominated in a currency other than the applicable
functional currency are translated using the historical rate. The Company continuously evaluates its
foreign currency exposures and may continue to enter into hedges or other risk mitigating arrangements in
the future. Aggregate gross foreign currency transaction gain (loss) prior to consideration of the offsetting
hedges recorded to income before taxes was ($3.3) million, ($2.8) million and $18.8 million in fiscal years
2013, 2012 and 2011, respectively.
Cash Equivalents, Short and Long-Term Marketable Securities. Cash equivalents consist of short-term,
highly liquid financial instruments with insignificant interest rate risk that are readily convertible to cash
and have maturities of three months or less from the date of purchase. Marketable securities with original
maturities greater than three months from purchase date and remaining maturities less than one year are
classified as short-term marketable securities. Marketable securities with remaining maturities greater than
one year as of the balance sheet date are classified as long-term marketable securities. Short and long-term
fixed income investments consist of U.S. Treasury securities, U.S. government-sponsored agency securities,
international government securities, corporate notes and bonds, municipal notes and bonds, asset-backed
securities and mortgage-backed securities. The fair market value of cash equivalents at December 29, 2013
approximated their carrying value. Cost of securities sold is based on specific identification.
In determining if and when a decline in market value below cost of these investments is
other-than-temporary, the Company evaluates both quantitative and qualitative information including the
market conditions, offering prices, trends of earnings, price multiples and other key measures. For fixed
income securities, only the decline attributable to deteriorating credit of an other-than-temporary
impairment is taken to the Consolidated Statement of Operations, unless the Company intends, or ‘‘more
likely than not’’ will be required, to sell the security.
Property and Equipment. Property and equipment are carried at cost less accumulated depreciation and
amortization. Depreciation and amortization are computed using the straight-line method over the
estimated useful lives of the assets, ranging from two to twenty-five years, or the remaining lease term,
whichever is shorter.
Variable Interest Entities. The Company evaluates its equity method investments to determine whether
any investee is a variable interest entity (‘‘VIE’’). If the Company concludes that an investee is a VIE, the
Company evaluates its power to direct the activities of the investee, its obligation to absorb the expected
losses of the investee and its right to receive the expected residual returns of the investee to determine
whether the Company is the primary beneficiary of the investee. If the Company is the primary beneficiary
of a VIE, the Company consolidates such entity and reflects the non-controlling interest of other
beneficiaries of that entity. If the Company concludes that an investee is not a VIE, the Company does not
consolidate the investee.
Equity Investments. The Company accounts for investments in equity securities of other entities,
including VIEs that are not consolidated, under the cost method of accounting if investments in voting
equity interests of the investee are less than 20%. The equity method of accounting is used if the
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