AMD 2004 Annual Report Download - page 80

Table of Contents
rights of return or price protection on unsold products held by them. In these instances, the Company recognizes revenue when it ships the product directly to the
distributors. The Company records estimated reductions to revenue under distributor and customer incentive programs, including certain advertising and
marketing promotions and volume based incentives and special pricing arrangements, at the time the related revenues are recognized. For transactions whereby
the Company reimburses customers for a portion of the customer’s cost to perform specific product advertising or marketing and promotional activities, such
amounts are recorded as a reduction of revenue unless they qualify for cost recognition under EITF Issue No. 01-09, “Accounting for Consideration Given by a
Vendor to a Customer (Including a Reseller of the Vendor’s Products).” Shipping and handling costs associated with product sales are included in cost of sales.
Inventories. Inventories are stated at standard cost adjusted to approximate the lower of actual cost (first-in, first-out method) or market (net realizable
value). Generally inventories on hand in excess of forecasted demand for six months or less are not valued. Obsolete inventories are written off.
Impairment of Long-Lived Assets. For long-lived assets used in operations, the Company records impairment losses when events and circumstances
indicate that these assets might be impaired and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amounts of those
assets. If less, the impairment losses are based on the excess of the carrying amounts of these assets over their respective fair values. Their fair values would then
become the new cost basis. Fair value is determined by discounted future cash flows, appraisals or other methods. For assets held for sale, impairment losses are
measured at the lower of the carrying amount of the assets or the fair value of the assets less costs to sell. For assets to be disposed of other than by sale,
impairment losses are measured as their carrying amount less salvage value, if any, at the time the assets cease to be used.
Restructuring Charges. The Company accounted for restructuring charges and subsequent changes in original estimates in accordance with EITF 94-3
for exit and disposal activities as they were initiated prior to December 30, 2002. Under EITF 94-3 restructuring charges are recorded upon approval of a formal
management plan and are included in the operating results of the period in which such plans have been approved. The Company reviews remaining restructuring
accruals on a quarterly basis and adjusts these accruals when changes in facts and circumstances suggest actual amounts will differ from the initial estimates.
Changes in estimates occur when it is apparent that exit and other costs accrued will be more or less than originally estimated.
In July 2002, the FASB issued Statement of Financial Accounting Standards No. 146, “Accounting for Costs associated with Exit or Disposal Activities”
(SFAS 146). SFAS 146 addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies EITF Issue No. 94-3,
“Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)”
(EITF 94-3). The principal difference between SFAS 146 and EITF 94-3 relates to SFAS 146’s timing for recognition of a liability for a cost associated with an
exit or disposal activity. SFAS 146 requires that a liability for an exit cost associated with an exit or disposal activity be recognized when the liability is incurred.
The Company has applied SFAS 146 prospectively as of December 30, 2002, the beginning of fiscal year 2003. Because the Company has not initiated any
restructuring activity since its adoption, SFAS 146 has not had a material impact on the Company’s operating results.
Commitments and Contingencies. From time to time the Company is a defendant or plaintiff in various legal actions that arise in the normal course of
business. The Company is also a party to environmental matters, including local, regional, state and federal government cleanup activities at or near locations
where the Company currently or has in the past conducted business. The Company is also a guarantor of various third-party obligations and commitments. The
Company is required to assess the likelihood of any adverse judgments or outcomes to these matters as well as potential ranges of probable losses. A
determination of the amount of reserves required for these commitments and contingencies, if any, that would be charged to earnings, includes assessing the
probability of adverse outcomes and estimating the amount of potential losses. The required reserves, if any, may change in the future due to new developments
in each matter or changes in circumstances,
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Source: ADVANCED MICRO DEVIC, 10-K, March 01, 2005