AMD 2006 Annual Report Download - page 101

Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2006, December 25, 2005 and December 26, 2004
NOTE 1: Nature of Operations
Advanced Micro Devices, Inc. (the Company or AMD) is a global semiconductor company with facilities throughout the world. References herein to the
“Company” mean AMD and its consolidated subsidiaries, including prior to December 21, 2005, Spansion Inc. (formerly, Spansion LLC) and its subsidiaries.
The Company provides processing solutions for the computing, graphics and consumer electronics markets. Prior to the initial public offering (IPO) of Spansion
Inc. on December 21, 2005, the Company also manufactured and sold Flash memory devices through its formerly consolidated majority owned subsidiary,
Spansion LLC. On October 25, 2006 the Company completed the acquisition of ATI Technologies Inc. (ATI) (see Note 3). As a result of the acquisition, AMD
began to supply 3D graphic, video and multimedia products and chipsets for personal computers, or PCs, including desktop and notebook PCs, professional
workstations, and servers and products for consumer electronic devices such as mobile phones, digital TVs and game consoles.
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 2006 consisted of 53 weeks and fiscal 2005
and 2004 each consisted of 52 weeks. Fiscal 2006, 2005 and 2004 ended on December 31, December 25, and December 26. Commencing in 2007, the Company
will use a 52- to 53- week fiscal year ending on the last Saturday in December.
Principles of Consolidation. The consolidated financial statements include the Company’s accounts and those of its wholly-owned subsidiaries,
including the results of operations of Spansion Inc. through December 20, 2005 and the operations of ATI from October 25, 2006 through December 31, 2006
(see Note 3). Upon consolidation, all significant intercompany accounts and transactions are eliminated, and amounts pertaining to the noncontrolling ownership
interests held by third parties in the operating results and financial position of the Company’s majority owned subsidiaries, are reported as minority interest.
Due to Spansion’s IPO on December 21, 2005 and the subsequent dilution of the Company’s ownership interest in Spansion (see Note 4), the Company
has used the equity method of accounting to reflect its share of Spansion’s net income (loss) from December 21, 2005 through December 31, 2006. Also,
included in the financial statements, under the equity method of accounting, is the Company’s percentage equity share of certain other investees’ operating
results, where the Company has the ability to exercise significant influence over the operations of the investee.
Use of Estimates. The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles 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. Areas where management uses subjective judgment include, but are not limited to,
revenue reserves, inventory valuation, goodwill and the valuation of acquisition related intangible assets, impairment of long-lived assets and deferred income
taxes.
Reclassifications. Certain reclassifications have been made to prior year balances in order to conform to the current year’s presentation of segment
information. (See Note 11).
Revenue Recognition. The Company recognizes revenue from products sold directly to customers, including original equipment manufacturers (OEMs),
when persuasive evidence of an arrangement exists, the price is fixed or determinable, delivery has occurred and collectibility is reasonably assured. Estimates of
product returns, allowances and future price reductions, based on actual historical experience and other known or
96
Source: ADVANCED MICRO DEVIC, 10-K, March 01, 2007