AMD 2001 Annual Report Download - page 232

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Company recognizes revenue when it ships the product directly to the
distributors. Shipping and handling costs associated with product sales are
included in cost of sales.
Investments in Derivative Financial Instruments Indexed to Advanced Micro
Devices Stock. In November 2000, the Financial Accounting Standards Board (FASB)
Emerging Issues Task Force ("EITF") reached a final consensus on EITF issue No.
00-19, "`Determination of Whether Share Settlement is Within the Control of the
Issuer' for purposes of applying EITF Issue No. 96-13, `Accounting for
Derivative Financial Instruments Indexed to, and Potentially Settled in, a
Company's Own Stock'" ("EITF 00-19" or "the Consensus"). EITF 96-13 addresses
accounting for equity derivative contracts indexed to, and potentially settled
in, a company's own stock ("equity derivatives") by providing guidance for
distinguishing between permanent equity, temporary equity and assets and
liabilities. EITF 00-19 addresses and clarifies whether specific contract
provisions or other circumstances cause a net-share or physical settlement
alternative to be within or outside the control of the issuer.
To qualify as permanent equity, all the following criteria must be met: the
equity derivative contract must permit the Company to settle in unregistered
shares; the Company must have sufficient authorized but unissued shares
available to settle the contract; the contract must contain an explicit limit on
the number of shares to be delivered in a share settlement; there can be no
requirement in the contract to post collateral; there can be no "make whole"
provisions in the contract; and there can be no provisions in the contract that
indicate the counterparty has rights that rank higher than those of a common
shareholder. Equity derivative contracts accounted for as permanent equity are
recorded at their initial fair value and subsequent changes in fair value are
not recognized unless a change in the contracts' classification occurs. Equity
derivative contracts not qualifying for permanent equity accounting are recorded
at fair value as an asset or liability with subsequent changes in fair value
recognized through the statement of operations.
During the year ended December 30, 2001, the Company sold equity derivatives
indexed to and potentially settled in its own stock and recorded the premiums
received as permanent equity under the provisions of the Consensus. Premiums
received during 2001 totaled approximately $2 million. At December 30, 2001,
there were no contracts outstanding.
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Source: ADVANCED MICRO DEVIC, 10-K, March 07, 2002