AMD 1998 Annual Report Download - page 233

Notes to Consolidated Financial Statements
December 27, 1998, December 28, 1997 and December 29, 1996
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NOTE 1. NATURE OF OPERATIONS
We are a semiconductor manufacturer with manufacturing facilities in the U.S.,
Europe and Asia and sales offices throughout the world. Our products include a
wide variety of industry-standard integrated circuits (ICs) which are used in
many diverse product applications such as telecommunications equipment, data and
network communications equipment, consumer electronics, personal computers (PCs)
and workstations.
Vantis Corporation (Vantis), our wholly owned subsidiary designs, develops and
markets programmable logic devices (PLDs). On September 29, 1997, we transferred
certain of the assets and liabilities of our PLD division (excluding bipolar
products) to Vantis.
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NOTE 2. BUSINESS COMBINATION
On January 17, 1996, we acquired NexGen, Inc. in a tax-free reorganization in
which NexGen was merged directly into AMD. At the date of the merger, we
reserved approximately 33.6 million total shares to be exchanged, which
represented eight-tenths (0.8) of a share of our common stock for each share of
the common stock of NexGen outstanding or subject to an assumed warrant or
option. We accounted for the merger under the pooling-of-interests method. We
prepared the consolidated financial statements to give retroactive effect to the
merger of NexGen with and into AMD on January 17, 1996.
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NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
FISCAL YEAR We use a 52- to 53-week fiscal year ending on the last Sunday in
December, which resulted in a 52-week fiscal year for 1998, 1997 and 1996, which
ended on December 27, December 28 and December 29, respectively.
PRINCIPLES OF CONSOLIDATION The consolidated financial statements include our
accounts and those of our subsidiaries. Upon consolidation, all significant
intercompany accounts and transactions are eliminated. Also included in our
consolidated financial statements, under the equity method of accounting, is our
49.992 percent investment in Fujitsu AMD Semiconductor Limited (FASL).
FOREIGN CURRENCY TRANSLATION We included in operations adjustments resulting
from the process of translating into U.S. dollars the foreign currency financial
statements of our wholly owned foreign subsidiaries for which the U.S. dollar is
the functional currency. We included in stockholders' equity the adjustments
relating to the translation of the financial statements of AMD Saxony, our
indirect wholly owned German subsidiary in Dresden, in the State of Saxony, and
our unconsolidated joint venture, for which the local currencies are the
functional currencies.
CASH EQUIVALENTS Cash equivalents consist of financial instruments which are
readily convertible into cash and have original maturities of three months or
less at the time of acquisition.
INVESTMENTS We classify, at the date of acquisition, our marketable debt and
equity securities into held-to-maturity and available-for-sale categories.
Currently, we classify our securities as available-for-sale which are reported
at fair market value with the related unrealized gains and losses included in
stockholders' equity. 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. The cost of securities sold is based on the specific
identification method.
We consider investments with maturities between 3 and 12 months short-term
investments. Short-term investments consist of money market auction rate
preferred stocks and debt securities such as commercial paper, corporate notes,
certificates of deposit and marketable direct obligations of United States
governmental agencies.
DERIVATIVE FINANCIAL INSTRUMENTS We utilize derivative financial instruments to
reduce financial market risks. We use these instruments to hedge foreign
currency and interest rate market exposures of underlying assets, liabilities
and other obligations. We do not use derivative financial instruments for
speculative or trading purposes. Our accounting policies for these instruments
are based on whether such instruments are designated as hedging transactions.
The criteria we use for designating an instrument as a hedge include the
instrument's effectiveness in risk reduction and
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Source: ADVANCED MICRO DEVIC, 10-K, March 29, 1999