AMD 2007 Annual Report Download - page 241

Spansion Inc.
Notes to Consolidated Financial Statements—(Continued)
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation and amortization are provided on a straight-line basis over the estimated useful lives of the
assets.
The estimated useful lives of property, plant and equipment for financial reporting purposes are as follows: machinery and equipment, two to five years;
buildings and building improvements, from five to 26 years; and leasehold improvements, the shorter of the remaining terms of the leases or the estimated
economic useful lives of the improvements.
Impairment of Long-Lived Assets
For long-lived assets used in operations, the Company evaluates the potential for impairment losses when events and circumstances indicate that those
assets might be impaired and the undiscounted cash flows estimated to be generated by those assets are less than their carrying value. If assets are judged to be
impaired, impairment losses are determined based on the excess, if any, of the carrying value of these assets over their respective fair value. If impairment losses
are recorded, the fair value of the assets would become the new cost basis. Fair value is determined by discounted future cash flows, appraisals or other methods.
For assets held for sale, impairment losses are measured at the lower of the carrying amount of the assets or their fair value less costs to sell. For assets to be
disposed of other than by sale, impairment losses are measured as their carrying amount less salvage value, if any, at the time the assets cease to be used.
Impairment losses were not material in any of the periods presented.
Product Warranties
The Company offers a one-year limited warranty for Spansion Flash memory devices (See Note 8). At the time revenue is recognized, the Company
provides for estimated costs that may be incurred under product warranty, with the corresponding expense recognized in cost of sales. Estimates of warranty
expense are based on the Company’s historical experience. Warranty accruals are evaluated periodically and are adjusted for changes in experience.
Foreign Currency Translation/Transactions
The functional currency of the Company and its foreign subsidiaries, except for its wholly owned subsidiary in Japan (Spansion Japan), is the U.S. dollar.
Adjustments resulting from remeasuring the foreign currency financial statements of these subsidiaries, other than Spansion Japan, into U.S. dollar financial
statements are included in operations. Adjustments resulting from translating the foreign currency financial statements of Spansion Japan, for which the
functional currency is the Japanese yen, into U.S. dollar financial statements are included as a separate component of accumulated other comprehensive income
(loss). Gains or losses resulting from transactions denominated in currencies other than the functional currencies of the Company and its subsidiaries are recorded
in cost of sales. The aggregate exchange loss included in determining net loss was $0.9 million, $4.7 million, and $5.3 million for the year ended December 31,
2006, December 25, 2005 and December 26, 2004, respectively.
Derivative Financial Instruments
The Company has sales, expenses, assets and liabilities denominated in Japanese yen and other foreign currencies. Therefore, movements in exchange
rates could cause net sales and expenses to fluctuate, affecting the Company’s profitability and cash flows. The Company’s general practice is to use foreign
currency forward
Source: ADVANCED MICRO DEVIC, 10-K, February 26, 2008