AMD 1993 Annual Report Download - page 371

7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 26, 1993, December 27, 1992, and December 29, 1991
1. ACCOUNTING POLICIES
Fiscal Year. Advanced Micro Devices' fiscal year ends on the last Sunday in
December, which resulted in a 52-week year ended December 26, 1993. This
compares with a 52-week fiscal year for 1992 and 1991, which ended on December
27 and 29, respectively.
Principles of Consolidation. The consolidated financial statements include the
accounts of Advanced Micro Devices, Inc. and its subsidiaries. Upon
consolidation, all significant intercompany accounts and transactions are
eliminated. Realized and unrealized foreign exchange gains and losses, which
have not been material, are included in results of operations.
Cash Equivalents. Cash equivalents consist of short-term financial instruments
which are readily convertible to cash and generally have original maturities of
three months or less at the time of acquisition.
Temporary Cash Investments. Temporary cash investments consist of commercial
paper, time deposits, certificates of deposit, bankers' acceptances and
marketable direct obligations of the United States Treasury, maturing within
one year. Investments in time deposits and certificates of deposit are acquired
from banks having combined capital, surplus and undivided profits of not less
than $200 million. Investments in commercial paper of industrial firms and
financial institutions are rated A1, P1 or better. Temporary cash investments
are carried at cost which approximates market.
Inventories. Inventories are stated principally at standard costs adjusted to
approximate the lower of cost (first-in, first-out) or market (net realizable
value).
Property, Plant and Equipment. Property, plant and equipment is stated at cost.
Depreciation and amortization are provided principally on the straight-line
method for financial reporting purposes and on accelerated methods for tax
purposes.
Investment in Joint Venture. In 1993, the company and Fujitsu Limited
established a joint venture, "Fujitsu-AMD Semiconductor Limited." AMD's share
of the joint venture is 49.95 percent and the investment is being accounted for
under the equity method. As of December 26, 1993, the amount invested in the
joint venture and the company's share of its results of operations were
immaterial.
Pursuant to a cross-equity provision between AMD and Fujitsu Limited, the
company purchased $10.8 million of Fujitsu Limited shares, with certain resale
restrictions. This investment is accounted for under the cost method. Under the
same provision, Fujitsu Limited has purchased 1 million shares of AMD common
stock and is required to purchase an additional 3.5 million shares over the
next several years for a total investment not to exceed $100 million.
Deferred Income on Shipments to Distributors. A portion of sales is made to
distributors under terms allowing certain rights of return and price protection
on unsold merchandise held by the distributors. These agreements can be
canceled by either party upon written notice, at which time the company
generally repurchases unsold inventory. Accordingly, recognition of sales to
distributors and related gross profits are deferred until the merchandise is
resold by the distributors.
Income Taxes. Effective December 28, 1992, the company adopted Statement of
Financial Accounting Standards No. 109 (SFAS No. 109), "Accounting for Income
Taxes." As permitted by SFAS No. 109, the company has elected not to restate
its financial statements for any periods prior to December 28, 1992. There was
no effect of adopting SFAS No. 109 on net income for the year ended December
26, 1993.
Net Income per Common Share. Primary net income per common share is based upon
weighted average common and dilutive common equivalent shares outstanding using
the treasury stock method. Dilutive common equivalent shares include stock
options and restricted stock. Fully diluted net income per common share is
computed using the weighted average common and dilutive common equivalent
shares outstanding, plus other dilutive shares outstanding which are not common
equivalent shares. Other dilutive shares which are not common equivalent shares
include convertible preferred stock.
Off-Balance-Sheet Risk. The company enters into various off-balance-sheet
financial transactions, including currency-forward contracts and interest rate
swaps to hedge its currency and interest-rate exposures. These instruments
involve, to a varying degree, elements of market and interest rate risk not
recognized in the consolidated financial statements.
Gains and losses associated with currency rate changes on forward contracts
are recorded currently in income unless the contract hedges a firm commitment,
in which case any gains and losses are deferred and included as a component of
the related transaction. Generally, the interest element of the forward
contract is recognized over the life of the contract.
Source: ADVANCED MICRO DEVIC, 10-K, March 07, 1994