AMD 2006 Annual Report Download - page 107

Table of Contents
The following are the components of accumulated other comprehensive income:
2006 2005
(In millions)
Net unrealized gains on available-for-sale securities, net of taxes of $1 in 2006 and $1 in 2005 $ 2 $ 5
Net unrealized gains (losses) on cash flow hedges, net of taxes of $0 in 2006 and $0 in 2005 5 (2)
Minimum pension liability (1) (1)
Cumulative translation adjustments 150 162
$ 156 $ 164
Stock-Based Compensation. On December 26, 2005, the Company adopted SFAS No. 123 (revised 2004), Share-Based Payment (SFAS 123R), which
requires the measurement and recognition of compensation expense for all share-based payment awards made to employees and directors, including employee
stock options and employee stock purchases pursuant to the Employee Stock Purchase Plan, based on estimated fair values. The Company adopted SFAS 123R
using the modified prospective transition method. In accordance with the modified prospective transition method, the Company has not restated its consolidated
financial statements for prior periods. Under this transition method, stock-based compensation expense for 2006 includes stock-based compensation expense for
all of the Company’s stock-based compensation awards granted prior to, but not yet vested as of, December 26, 2005, based on the grant-date fair value estimated
in accordance with the provision of SFAS No. 123, Accounting for Stock-Based Compensation (SFAS 123), as well as stock-based compensation expense for all
stock-based compensation awards granted on or after December 26, 2005 based on the grant-date fair value estimated in accordance with the provisions of SFAS
123R. Prior to the adoption of SFAS 123R, the Company recognized stock-based compensation expense in accordance with Accounting Principles Board (APB)
Opinion No. 25, Accounting for Stock Issued to Employees (Opinion 25).
Upon adoption of SFAS 123R, the Company changed its method of attributing the value of stock-based compensation expense from the multiple-option
(i.e., accelerated) approach to the single option (i.e., straight-line) method. Compensation expense for share-based awards granted prior to December 26, 2005
will continue to be subject to the accelerated multiple option method specified in FASB Interpretation No. 28, Accounting for Stock Appreciation Rights and
Other Variable Stock Option or Award Plans (FIN 28), while compensation expense for stock-based awards granted on or after December 26, 2005 will be
recognized using a straight-line, single option method.
Also, upon adoption of SFAS 123R, the Company changed its method of valuation for stock option awards from the Black-Scholes-Merton
(“Black-Scholes”) option-pricing model, which was previously used for the Company’s pro forma information disclosures of stock-based compensation expense
as required under SFAS 123, to a lattice-binomial option-pricing model.
SFAS 123R requires that the cash flows resulting from excess tax benefits related to stock compensation be classified as cash flows from financing
activities.
In March 2005, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin No. 107 (SAB 107) regarding the SEC’s interpretation of
SFAS 123R and the valuation of share-based payments for public companies. The Company has applied the provisions of SAB 107 in its adoption of
SFAS 123R. (See Note 12 for a further discussion on stock-based compensation).
The Company’s determination of the fair value of share-based payment awards on the date of grant using an option-pricing model is affected by the
Company’s stock price as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to, the
Company’s expected stock price volatility over the term of the awards and actual and projected employee stock option exercise
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Source: ADVANCED MICRO DEVIC, 10-K, March 01, 2007