Western Digital 2001 Annual Report Download - page 52

WESTERN DIGITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
Accounting Standards No. 138, ""Accounting for Certain Derivative Instruments and Certain Hedging
Activities, an Amendment of FASB Statement No. 133''. SFAS 133, as amended, establishes accounting and
reporting standards for derivative instruments embedded in other contracts and for hedging activities.
The Company had outstanding forward exchange contracts with commercial banks with nominal values
of $66.4, $13.5 and $2.8 million, at July 3, 1999, June 30, 2000 and June 29, 2001, respectively. Upon adoption
of SFAS 133, the Company elected not to designate these forward exchange contracts as accounting hedges
and any changes in fair value have been recorded through the results of operations for the year ended June 29,
2001. Such changes in fair value were minor for the year ended June 29, 2001. Unrealized gains and losses on
outstanding forward exchange contracts and foreign currency transactions are recorded in the consolidated
statements of operations at each quarter end and were not material to the consolidated Ñnancial statements as
of and for the year ended June 30, 2000. For the year ended July 3, 1999, the total net loss on foreign currency
transactions and forward exchange contracts was $10.3 million. Of this amount, a realized loss of $7.5 million
on terminated hedging contracts was recorded due to the imposition of exchange controls by the Malaysian
government. Historically, the Company has focused on hedging its foreign currency risk related to the
Malaysian Ringgit, the Singapore Dollar and the British Pound. With the establishment of currency controls
and the prohibition of purchases or sales of the Malaysian Ringgit by oÅshore companies, the Company
discontinued hedging its Malaysian Ringgit currency risk in 1999. Future hedging of this currency will depend
on currency conditions in Malaysia. As a result of the closure of the Company's Singapore operations in 2000,
the Company discontinued its hedging program related to the Singapore Dollar.
Use of Estimates
Company management has made estimates and assumptions relating to the reporting of certain assets
and liabilities in conformity with generally accepted accounting principles. Actual results could diÅer from
these estimates.
ReclassiÑcations
Certain prior years' amounts have been reclassiÑed to conform to the current year presentation.
New Accounting Pronouncements
During July 2001, the Financial Accounting Standards Board (""FASB'') issued Statement of Financial
Accounting Standards No. 141, ""Business Combinations'' (""SFAS 141'') and Statement of Financial
Accounting Standards No. 142, ""Goodwill and Other Intangible Assets'' (""SFAS 142''). EÅective June 30,
2001, the Company adopted SFAS 141. SFAS 141 addresses Ñnancial accounting and reporting for business
combinations and requires that all business combinations initiated after June 30, 2001 be accounted for using
the purchase method. The adoption of SFAS 141 did not have a material impact on the Company's Ñnancial
position or results of operations.
SFAS 142 requires that goodwill and intangible assets that have indeÑnite useful lives not be amortized
but rather be tested at least annually for impairment. The Company is required to adopt SFAS 142 on
June 29, 2002. However, goodwill and intangible assets acquired after June 30, 2001 are subject to the
amortization provisions of SFAS 142. The Company does not expect the adoption of SFAS 142 to have a
material impact on the Company's Ñnancial position or results of operations.
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