AMD 2002 Annual Report Download - page 54

Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 29, 2002, December 30, 2001 and December 31, 2000
NOTE 1: Nature of Operations
The Company is a semiconductor manufacturer with manufacturing facilities in the United States, Europe, China and Asia and sales offices throughout the
world. The Company designs, manufactures and markets industry-standard digital integrated circuits, or ICs, that are used in many diverse product applications
such as personal computers, workstations, servers, communications equipment and automotive and consumer electronics. The Company’s products consist of
microprocessors, Flash memory devices and personal connectivity solutions.
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 2002 and 2001 were 52-week years, which
ended on December 29 and December 30, respectively. Fiscal 2000 was a 53-week year, which ended on December 31, 2000. Fiscal 2003 will be a 52-week year
ending December 28, 2003.
Use of Estimates. The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of commitments and
contingencies at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results are likely to
differ from those estimates, and such differences may be material to the financial statements.
Investments. The Company classifies its marketable debt and equity securities at the date of acquisition as either held to maturity or available for sale.
Substantially all of the Company’s marketable debt and equity securities are classified as available-for-sale. These securities are reported at fair market
value with the related unrealized gains and losses included in other comprehensive income (loss), net of tax, a component of stockholders equity. Realized gains
and losses and declines in the value of securities determined to be other-than-temporary are included in interest and other income, net. Interest and dividends on
all securities are also included in interest and other income, net. The cost of securities sold is based on the specific identification method.
The Company classifies 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
United States governmental agencies. Available-for-sale securities with maturities greater than twelve months are classified as short term when they represent
investments of cash that are intended to be used in current operations.
Revenue Recognition. The Company recognizes revenue from products sold directly to customers when persuasive evidence of an arrangement exists,
the price is fixed or determinable, shipment is made and collectibility is reasonably assured. Estimates of product returns and allowances, based on actual
historical experience, are recorded at the time revenue is recognized. 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 distributor is terminated and the distributor’s products
have not been sold. Accordingly, the Company defers the net gross margin, resulting from the deferral of both revenue and related product costs from sales to
distributors with agreements that have the aforementioned terms until the merchandise is resold by the distributors. The Company also sells its
48
Source: ADVANCED MICRO DEVIC, 10-K, March 14, 2003