AMD 2006 Annual Report Download - page 276

Spansion Inc.
Notes to Consolidated Financial Statements—(Continued)
Allowance for Doubtful Accounts
The following describes activity in the accounts receivable allowance for doubtful accounts for the years ended December 31, 2006, December 25, 2005
and December 26, 2004.
Year
Balance at
Beginning
of Period
Addition
Charged to
Costs and
Expenses Deductions(1)
Balance
at End
of Period
(in thousands)
2006 $ 2,214 $ 2,383 $ — $ 4,597
2005 $ — $ 2,472 $ 258 $ 2,214
2004 $ — $ — $ — $ —
(1) Uncollectible amounts written off, net of recoveries
Inventories
Inventories are stated at standard cost adjusted to approximate the lower of actual cost (first-in, first-out method) or market. Inventories in stock in excess
of forecasted customer demand over the next six months are not valued. Obsolete inventories are written off.
Revenue Recognition
Prior to the second quarter of fiscal 2006, the Company generally recognized revenue when AMD and Fujitsu, the Company’s sole distributors, sold its
products to their OEM customers and title and risk of loss for the products transferred to the OEM. In the second quarter of fiscal 2006, the Company began
selling its products directly to the customers previously served by AMD. Since such time, the Company generally recognizes revenue when it has sold its
products to its OEM customers and title and risk of loss for the products have transferred to the OEM. Estimates of product returns and sales allowances, related
to reasons other than product quality, are based on actual historical experience and are recorded as a reduction in revenue at the time revenue is recognized.
Prior to the second quarter of fiscal 2006, AMD sold the Company’s products to its distributors under terms allowing these distributors certain rights of
return, stock rotation and price protection privileges on unsold merchandise held by them. The Company extended the same rights on these Flash memory
product sales to AMD. Accordingly, the Company deferred revenue and related product costs from such sales to AMD as deferred income on shipments to
related party/member, until the merchandise was resold by AMD’s distributors. In the second quarter of fiscal 2006, the Company began to sell directly to such
distributors and to provide similar rights of return, stock rotation and price protection previously offered by AMD. The Company defers the recognition of
revenue and related product costs on these sales as deferred income until the merchandise is resold by its distributors. The Company also sells some of its
products to certain distributors under sales arrangements with terms that do not allow for rights of returns or price protection on unsold products held by them. In
these instances, the Company recognizes revenue when it ships the product directly to the distributors.
Fujitsu also sells the Company’s products to its distributors. The Company’s distribution agreement with Fujitsu grants limited stock rotation rights to
Fujitsu and allows Fujitsu to provide similar limited rights to some of its distributors. However, to date, Fujitsu has not extended these rights to its distributors.
Accordingly, the Company recognizes revenue for sale of products sold to Fujitsu when Fujitsu sells the Company’s products to its distributors.
Source: ADVANCED MICRO DEVIC, 10-K, March 01, 2007