AMD 2001 Annual Report Download - page 197

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
which form the basis for making judgments about the carrying values of assets
and liabilities. Actual results may differ from these estimates under different
assumptions or conditions.
We believe the following critical accounting policies relate to those policies
that are most important to the presentation of our financial statements and
require the most difficult, subjective and complex judgments.
Investments in Debt and Equity Securities. We hold minority interests in
companies having operations or possessing technology primarily in areas within
our strategic focus, some of which are publicly traded and have highly volatile
stock prices. We also make investments in marketable equity and debt securities.
We record an investment impairment charge when we believe an investment has
experienced a decline in value that is other-than-temporary. In determining if a
decline in market value below cost for a publicly traded security or debt
instrument is other-than-temporary, we evaluate the relevant market conditions,
offering prices, trends of earnings, price multiples and other key measures
providing an indication of the instrument's fair value. For private equity
investments, we evaluate the financial condition of the investee, market
conditions, trends of earnings and other key factors that provide indicators of
the fair market value of the investment. When a decline in value is deemed to be
other-than-temporary, we recognize an impairment loss in the current period to
the extent of the decline below the carrying value of the investment. Adverse
changes in market conditions or poor operating results of underlying investments
could result in additional other-than-temporary losses in future periods.
Allowance for Doubtful Accounts. We evaluate the collectibility of our accounts
receivable based on a combination of factors. In circumstances where we are
aware of a specific customer's inability to meet its financial obligations to
us, we record a specific allowance against amounts due to reduce the net
recognized receivable to the amount we reasonably believe will be collected. For
all other customers, we recognize allowances for doubtful accounts based on the
length of time the receivables are past due, the current business environment
and our historical experience. If the financial condition of our customers were
to deteriorate or if economic conditions worsened, additional allowances may be
required in the future.
Revenue Reserves. We record a provision for estimated sales returns and
allowances on product sales in the same period as the related revenues are
recorded. We base these estimates on historical sales returns and other known
factors. Actual returns could be different from our estimates and current
provisions for sales returns and allowances, resulting in future charges to
earnings.
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Source: ADVANCED MICRO DEVIC, 10-K, March 07, 2002