AMD 2006 Annual Report Download - page 105

Table of Contents
currency of the Company’s foreign subsidiaries was the U.S. dollar, except for AMD Saxony Limited Liability Company & Co. KG (AMD Saxony) and AMD
Fab 36 & Co. KG (AMD Fab 36 KG) whose functional currencies were the euro. Beginning in 2006, following an evaluation of the scope of their operations and
business practices, the Company concluded that the U.S. dollar is the currency of the primary economic environment in which these subsidiaries operate, and
changed the functional currency of AMD Saxony and AMD Fab 36 KG to the U.S. dollar. Additionally, Spansion Japan, a consolidated subsidiary of AMD until
December 20, 2005, used the Japanese yen as its functional currency.
For subsidiaries whose functional currency is the U.S. dollar, assets and liabilities denominated in non-U.S. dollars have been remeasured into U.S. dollars
at current exchange rates for monetary assets and liabilities and historical exchange rates for non monetary assets and liabilities. Net revenue, cost of sales and
expenses have been remeasured at average exchange rates in effect during each period, except for those net revenue, cost of sales and expenses related to the
previously noted non monetary balance sheet amounts, which have been remeasured at historical exchange rates. The gains or losses from foreign currency
remeasurement have been included in net income (loss).
In 2005 and 2004, adjustments resulting from translating the foreign currency financial statements of AMD Saxony, AMD Fab 36, KG, and Spansion
Japan into the U.S. dollar have been included as a separate component of accumulated other comprehensive income (loss). Upon the change of the functional
currency for AMD Saxony and AMD Fab 36 KG, these subsidiaries no longer generate translation adjustments. Translation adjustments from prior periods will
continue to remain a component of accumulated other comprehensive income (loss). The Company will continue to include its proportionate share of the
translation adjustments relating to Spansion Japan in accumulated other comprehensive income (loss). In November 2006, upon the sale of a portion of its
investment in Spansion, the Company’s proportionate share of the translation adjustment relating to Spansion Japan was reduced accordingly. (See Note 4).
The gains or losses resulting from transactions denominated in currency other than the functional currencies have been recorded in net income (loss). The
aggregate exchange gain (loss) included in determining net income (loss) was ($22) million in 2006, ($8) million in 2005, and $40 million in 2004.
Guarantees. The Company accounts for guarantees in accordance with Financial Accounting Standards Board Interpretation No. 45 Guarantor’s
Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others (FIN 45). 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 14).
Foreign Grants and Subsidies. The Company receives or has received investment grants and allowances from the Federal Republic of Germany and the
State of Saxony in connection with Fab 30 and Fab 36 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 conditions specified in the relevant subsidy grant
documents. Accordingly, amounts received are initially recorded as a long-term liability on the Company’s financial statements, and then are amortized as a
reduction to cost of sales. Fab 30 related subsidies are being amortized to operations ratably through December 2007. Fab 36 related investment allowances are
being amortized to operations ratably over the lives of the underlying asset associated with the investment allowance. Fab 36 related grants are being amortized
to operations ratably through December 2012.
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 set forth in the subsidy grant are met.
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Source: ADVANCED MICRO DEVIC, 10-K, March 01, 2007