AMD 1995 Annual Report Download - page 233

notes
TO CONSOLIDATED FINANCIAL STATEMENTS
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December 31, 1995, December 25, 1994, and December 26, 1993
NOTE 1 NATURE OF OPERATIONS
AMD is a semiconductor manufacturer with manufacturing facilities in the U.S.
and Asia, and sales offices throughout the world. Focusing on the personal and
networked computing and communications markets, AMD is a global company that
derives more than half of its revenues from international sales, mainly in
Europe and Asia. The company provides programmable products in concert with
applications solutions to the manufacturers of equipment for personal and
networked computation and communications.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Fiscal year. The company uses a 52- to 53-week fiscal year ending on the last
Sunday in December, which resulted in a 53-week year ended December 31, 1995.
This compares with a 52-week fiscal year for 1994 and 1993, which ended on
December 25 and 26, respectively.
Principles of consolidation. The consolidated financial statements include the
accounts of the company and its subsidiaries. Upon consolidation, all
significant intercompany accounts and transactions are eliminated. Also included
in the financial statements of the company, under the equity method of
accounting, is the company's 49.95 percent investment in Fujitsu AMD
Semiconductor Limited (FASL).
Foreign currency translation. The U.S. dollar is the functional currency for the
company's wholly-owned foreign subsidiaries. Translation adjustments, resulting
from the process of translating foreign currency financial statements into U.S.
dollars, are included in operations. The functional currency of the company's
unconsolidated joint venture is the Japanese yen. Translation adjustments
relating to the translation of these statements have not been material, and
therefore, are not disclosed as a separate component of stockholders' equity.
Cash equivalents. Cash equivalents consist of financial instruments which are
readily convertible to cash and have original maturities of three months or less
at the time of acquisition.
Investments. The company classifies its marketable debt and equity securities
into held-to-maturity and available-for-sale categories in accordance with the
provisions of the Statement of Financial Accounting Standard No. 115 (SFAS No.
115), "Accounting for Certain Instruments in Debt and Equity Securities." In
accordance with the FASB staff Special Report, "A Guide to Implementation of
Statement 115 on Accounting for Certain Investments in Debt and Equity
Securities," the company chose to reclassify, as of December 31, 1995, cash
equivalents and short-term investments from held-to-maturity to available-for-
sale. Securities classified as available-for-sale are reported at fair market
value with the related unrealized gains and losses included in retained
earnings. Realized gains and losses and declines in value of securities judged
to be other than temporary are included in interest income and other, net.
Interest and dividends on all securities are included in interest income and
other, net.
Investments with maturities between three and twelve months are considered
short-term investments. Short-term investments consist of money market auction
preferred stocks and debt securities such as commercial paper, time deposits,
certificates of deposit, bankers' acceptances, and marketable direct obligations
of the United States Treasury.
Foreign exchange forward contracts. Foreign exchange forward contracts are used
to hedge the company's net monetary asset positions in its foreign subsidiaries
and the company's liabilities for products purchased from FASL. Realized gains
and losses from these hedges are included in operations. Premiums and discounts,
if any, are amortized over the life of the contract and included in operations.
Foreign currency options. Foreign currency options are used to hedge firm
commitments with respect to the company's joint venture (FASL) investment.
Realized gains and losses from these hedges are deferred and included in other
assets or accrued liabilities, respectively. They are recognized in operations
in the same period as the hedged transactions. Premiums and discounts, if any,
are amortized over the life of the contract and included in operations.
Interest rate swaps. The company enters into interest rate swaps primarily to
reduce its interest rate exposure by changing a portion of the company's
interest rate exposure from a floating rate to a fixed rate basis. The
differential between fixed and floating rates to be paid or received is accrued
and recognized as an adjustment to interest expense. Accordingly, the related
amount payable to or receivable from counterparties is included in other current
assets or accrued liabilities.
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Source: ADVANCED MICRO DEVIC, 10-K405, March 21, 1996