AMD 2000 Annual Report Download - page 400

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
debt securities such as commercial paper, corporate notes, certificates of
deposit and marketable direct obligations of 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 generally 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.
Inventories. Inventories are stated at standard cost adjusted to approximate the
lower of cost (first-in, first-out method) or market (net realizable value).
Property, Plant and Equipment. Property, plant and equipment are stated at cost.
Depreciation and amortization are provided on a straight-line basis over the
estimated useful lives of the assets for financial reporting purposes and on
accelerated methods for tax purposes. Estimated useful lives for financial
reporting purposes are as follows:
. machinery and equipment, three to five years;
. buildings, up to 26 years; and
. leasehold improvements, the shorter of the remaining terms of the
leases or the estimated economic useful lives of the improvements.
Revenue Recognition. The Company recognizes revenue from product sold direct to
customers when the contract is in place, the price is determined, shipment is
made and collectibility is reasonably assured. The Company sells to distributors
under terms allowing the distributors certain rights of return and price
protection on unsold merchandise held by them. The distributor agreements, which
may be canceled by either party upon specified notice, generally contain a
provision for the return of the Company's products in the event the agreement
with the
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Source: ADVANCED MICRO DEVIC, 10-K405, March 20, 2001