AMD 2006 Annual Report Download - page 115

Table of Contents
The primary purpose for accelerating the vesting of these awards was to minimize future compensation expense that the Company and Spansion would
otherwise have been required to recognize in its and Spansion’s respective consolidated statements of operations with respect to these awards. If the Company
had not accelerated the vesting of these awards, they would have been subject to variable fair value accounting in accordance with the guidance provided in EITF
Issue No. 96-18, Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling Goods or Services,
and EITF Issue No. 00-12, Accounting by an Investor for Stock-Based Compensation Granted to Employees of an Equity Method Investee. This accounting
treatment would have applied because subsequent to Spansion’s IPO, the Company no longer consolidates Spansion’s results of operations. Accordingly,
Spansion employees are no longer considered employees of the Company. Under variable fair value accounting, the Company would have been required to
remeasure the fair value of unvested stock-based awards of the Company’s common stock held by Spansion employees after Spansion’s IPO at the end of each
accounting period until such awards were fully vested.
The acceleration of these awards resulted in a compensation charge in the Company’s fourth quarter of 2005 of $1.5 million, which was based on the
estimated forfeiture rate of 7.94 percent. The actual forfeitures for 2006 were not materially different from the estimate used.
In addition to the acceleration of vesting of certain stock awards as indicated above, there were approximately 684,000 unvested AMD stock options and
restricted stock units still held by Spansion employees which were subject to variable accounting. In November 2006, subsequent to the sale of shares in the
Offering, the Company’s ownership interest in Spansion was reduced to 21 percent. As a result, Spansion was no longer an “affiliate” under the terms of the
equity incentive plans under which these options were issued, and the unvested AMD stock options and restricted stock units were cancelled and no longer
subject to variable accounting. In addition, the expense associated with variable accounting for these unvested options and restricted stock units was reversed in
2006.
Summarized Financial Information
The following table presents summarized consolidated financial information for Spansion Inc., which was the basis of applying the equity method in the
Company’s consolidated financial statements:
Spansion Inc.
2006 2005(1)
(In millions)
Consolidated statement of operations information
Revenue $ 2,579
Gross profit 513
Operating loss (91)
Net loss $ (148)
Consolidated balance sheet information
Current assets $ 1,775 $ 1,673
Long-term assets 1,775 1,629
Total assets $ 3,550 $ 3,302
Current liabilities $ 690 $ 791
Long-term liabilities 1,014 589
Total stockholders’ equity 1,846 1,922
Total liabilities and stockholders’ equity $ 3,550 $ 3,302
(1) Since the Company accounted for Spansion Inc. using the equity method of accounting for only the last five days of 2005, the Company has not provided
summary statement of operations information for 2005.
110
Source: ADVANCED MICRO DEVIC, 10-K, March 01, 2007