AMD 2004 Annual Report Download - page 82

Table of Contents
provided on a straight-line basis over the estimated useful lives of the assets for financial reporting purposes. Estimated useful lives for financial reporting
purposes are as follows: equipment, two to five years; building improvements, 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.
Treasury Stock. The Company accounts for treasury stock acquisitions using the cost method. For reissuance of treasury stock, to the extent that the
reissuance price is more than the cost, the excess is recorded as an increase to Paid in Capital. If the reissuance price is less than the cost, the difference is also
recorded to Paid in Capital to the extent there is a cumulative treasury stock paid in capital balance. Once the cumulative balance is reduced to zero, any
remaining difference resulting from the sale of treasury stock below cost is recorded to Retained Earnings.
Product Warranties. The Company offers a three-year limited warranty to end users for microprocessor products that are commonly referred to as
“processors in a box” and a one-year limited warranty to direct purchasers for all other microprocessor, Flash memory and embedded processor products. Under
limited circumstances, the Company may offer an extended limited warranty to direct purchasers of Flash memory products or of microprocessor products that
are intended for systems targeted at the commercial and embedded end markets.
Foreign Currency Translation/Transactions. The functional currency of the Company’s foreign subsidiaries, except AMD Saxony Limited Liability
Company & Co. KG (AMD Saxony), AMD Fab 36 LLC & Co. KG (AMD Fab 36 KG), and Spansion Japan, is the U.S. dollar. Translation adjustments resulting
from remeasuring the foreign currency denominated financial statements of subsidiaries into the U.S. dollar are included in operations, except for AMD Saxony,
AMD Fab 36 KG, and Spansion Japan, whose functional currencies are their local currencies. The functional currency of AMD Saxony & Co. KG and AMD Fab
36 KG is the euro. The functional currency of Spansion Japan is the yen. Adjustments resulting from translating the foreign currency financial statements of
AMD Saxony, AMD Fab 36 LLC & Co. KG, and Spansion Japan into the U.S. dollar are included as a separate component of accumulated other comprehensive
income (loss). In addition, the gains or losses resulting from transactions denominated in currency other than the functional currencies are recorded in net income
(loss). The aggregate exchange gain included in determining net income (loss) was $40 million in 2004, $88 million in 2003 and $31 million in 2002.
Guarantees. The Company accounts for guarantees in accordance with FASB Interpretation No. 45 (FIN 45), “Guarantor’s Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others.” Under FIN 45, a liability for the fair value of the obligation undertaken
in issuing the guarantee is recognized. However, this is limited to those guarantees issued or modified after December 31, 2002. The recognition of fair value is
not required for certain guarantees such as the parent’s guarantee of a subsidiary’s debt to a third party or guarantees on product warranties. For those guarantees
excluded from FIN 45’s fair value recognition provision, financial statement disclosures of their terms are made (see Note 12).
Foreign Grants and Subsidies. The Company receives investment grants and allowances as well as interest subsidies under a Subsidy Agreement with
the Federal Republic of Germany and the State of Saxony in connection with the construction and facilitization of Fab 30 in Dresden, Germany. Generally, such
grants and subsidies are subject to forfeiture in declining amounts over the life of the agreement, if the Company does not maintain certain levels of employment
or meet other agreement conditions. Accordingly, amounts received under the Subsidy Agreement are recorded as a long-term liability on the Company’s
financial statements and are being amortized to operations ratably over the contractual life of the Subsidy Agreement as a reduction to operating expenses
through December of 2007.
From time to time, the Company also applies for subsidies relating to certain research and development projects. These research and development
subsidies are recorded as a reduction of research and development expenses when all conditions and requirements are met. In addition, the Company also
receives investment
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Source: ADVANCED MICRO DEVIC, 10-K, March 01, 2005