AMD 2006 Annual Report Download - page 91

Table of Contents
and marketing, sales and administrative expenses, to be in the range of $830 million to $880 million, which includes ATI restructuring charges and stock option
expense. ATI acquisition related charges will be approximately $120 million in the first quarter, of which $90 million is included in the operating expense
amount previously mentioned and $30 million will be recorded to cost of sales. We expect employee stock-based compensation expense in the first quarter to be
approximately $32 million. We also expect 2007 capital expenditures to be approximately $2.5 billion.
Recently Issued Accounting Pronouncements
In June 2006, the EITF reached a final consensus on EITF Issue No. 06-2 Accounting for Sabbatical Leave and Other Similar Benefits Pursuant to FASB
Statement No. 43, Accounting for Compensated Absences. Under this consensus, sabbatical leave or other similar benefits provided to an employee are
considered to accumulate, as that term is used in SFAS 43, provided that (a) the employee is required to complete a minimum service period to be entitled to the
benefit, (b) there is no increase to the benefit if the employee provides additional years of service, (c) the employee continues to be a compensated employee
during his or her absence, and (d) the employer does not require the employee to perform any duties during his or her absence. If these conditions are met,
companies are required to accrue for sabbatical leave or other similar benefits as they are earned. The accounting required under this consensus will be effective
for fiscal years beginning after December 15, 2006. Upon adoption, companies can choose to apply the guidance using either of the following approaches: (a) a
change in accounting principle through retrospective application to all periods presented, or (b) a change in accounting principle through a cumulative-effect
adjustment to the balance in retained earnings at the beginning of the year of adoption. We adopted the new accounting requirement on January 1, 2007, and
recorded a cumulative effect adjustment of approximately $24 million to our beginning retained earnings balance.
In July 2006, the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109
(FIN 48). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with SFAS 109. It
prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be
taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods and disclosures. FIN 48
is effective for fiscal years beginning after December 15, 2006. The provisions of FIN 48 apply to all tax positions upon initial adoption of FIN 48. Only tax
positions that meet the recognition threshold criteria at the effective date may be recognized or continue to be recognized upon adoption of FIN 48. The
cumulative effect applying the provisions of FIN 48 will be reported as an adjustment to the opening balance of retained earnings for that fiscal year unless the
adjustment relates to tax positions taken by an acquired entity that existed at the time of the acquisition, in which case the adjustment would be recorded to
goodwill. We are currently evaluating the impact of adoption of FIN 48 and expect to adopt it as required at the beginning of our fiscal year of 2007.
In September 2006, FASB issued SFAS No. 157, Fair Value Measurements (SFAS 157). SFAS 157 does not require any new fair value measurements but
clarifies the fair value definition, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. SFAS 157 clarifies
that the fair value is the exchange price in an orderly transaction between market participants to sell the asset or transfer the liability in the market. It emphasizes
that fair value is a market-based measurement, not an entity-specific measurement and a fair value measurement should therefore be based on the assumptions
that market participants would use in pricing the asset or liability. SFAS 157 expands disclosures about the use of fair value to measure assets and liabilities in
interim and annual periods subsequent to initial recognition, including the inputs used to measure fair value and the effect of such measurements on earnings for
the period. It will be effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years
with earlier application encouraged. We are currently evaluating the accounting and disclosure requirements of SFAS 157 and plan to adopt it as required at the
beginning of our fiscal year of 2008.
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Source: ADVANCED MICRO DEVIC, 10-K, March 01, 2007