AMD 1999 Annual Report Download - page 150

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 26, 1999, December 27, 1998 and December 28, 1997
Note 1: Nature of Operations
AMD (the Company) is a semiconductor manfacturer with manufacturing facilities
in the U.S., Europe and Asia and sales offices throughout the world. The
Company's 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.
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. Fiscal 1999, 1998 and 1997 were 52-week years which ended on
December 26, December 27 and December 28, respectively. Fiscal 2000 will be a
53-week year ending on December 31, 2000.
Principles of Consolidation. The consolidated financial statements include the
Company's accounts and those of its wholly owned subsidiaries. Upon
consolidation, all significant intercompany accounts and transactions are
eliminated. Also included in the consolidated financial statements, under the
equity method of accounting, is the Company's 49.992 percent investment in
Fujitsu AMD Semiconductor Limited (FASL).
Foreign Currency Translation. Translation adjustments resulting from the process
of translating into the U.S. dollars the foreign currency financial statements
of the Company's wholly owned foreign subsidiaries for which the U.S. dollar is
the functional currency are included in operations. The translation adjustments
relating to the translation of the financial statements of the Company's
indirect wholly owned German subsidiary in Dresden, in the State of Saxony (AMD
Saxony), and the Company's unconsolidated joint venture, FASL, for which the
local currencies are the functional currencies, are included in stockholders'
equity.
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. The Company classifies its marketable debt and equity securities at
the date of acquisition, into held-to-maturity and available-for-sale
categories. Currently, the Company classifies its securities as available-for-
sale. These securities 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 also included in interest income and other, net. The cost of
securities sold is based on the specific identification method.
The Company considers investments with maturities between three and 12 months
as 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
the United States governmental agencies.
Derivative Financial Instruments. The Company utilizes derivative financial
instruments to reduce financial market risks. The Company uses these instruments
to hedge foreign currency and interest rate market exposures of underlying
assets, liabilities and other obligations. The Company does not use derivative
financial instruments for speculative or trading purposes. The Company's
accounting policies for these instruments are based on whether such instruments
are designated as hedging transactions. The criteria the Company uses for
designating an instrument as a hedge includes the instrument's effectiveness in
risk reduction and one-to-one matching of derivative instruments to underlying
transactions. Gains and losses on foreign currency forward and option contracts
that are designated and effective as hedges of anticipated transactions, for
which a firm commitment has been attained, are deferred and either recognized in
income or included in the basis of the transaction in the same period that the
underlying transactions are settled. Gains and losses on foreign currency
forward and option contracts and interest rate swap contracts that are
designated and effective as hedges of existing transactions are recognized in
income in the same period as losses and gains on the underlying transactions are
recognized and generally offset. Gains and losses on any instruments not meeting
the above criteria are recognized in income in the current period. If an
underlying hedged transaction is terminated earlier than initially anticipated,
the offsetting gain or loss on the related derivative instrument is recognized
in income in the same period. Subsequent gains or losses on the related
derivative instrument are recognized in income in each period until the
instrument matures, is terminated or is sold. Premiums paid for foreign currency
forward and option contracts are generally amortized over the life of the
contracts and are not material to our results of operations. Unamortized
premiums are included in prepaid expenses and other current assets.
27
Source: ADVANCED MICRO DEVIC, 10-K405, March 21, 2000