AMD 2007 Annual Report Download - page 244

Spansion Inc.
Notes to Consolidated Financial Statements—(Continued)
The Company adopted Statement 123(R) using the modified prospective transition method, which requires the application of the accounting standard as of
December 26, 2005, the first day of the Company’s fiscal year ending December 31, 2006. The Company’s consolidated financial statements as of and for the
year ended December 31, 2006, reflect the impact of Statement 123(R). In accordance with the modified prospective transition method, the Company’s
consolidated financial statements for prior periods have not been restated to reflect, and do not include, the impact of Statement 123(R).
In March 2005, the SEC issued Staff Accounting Bulletin (SAB) No. 107 regarding the SEC’s interpretation of Statement 123(R) and the valuation of
share-based payments for public companies. The Company applied the provisions of SAB 107 in its adoption of Statement 123(R).
The Company estimated the fair value of its stock-based awards to employees using Black-Scholes-Merton option pricing model. Stock-based
compensation expense recognized during a period is based on the higher of the grant-date fair value of the portion of share-based payment awards that is
ultimately expected to vest, or actually vest, during the period. Stock-based compensation expense recognized in the Company’s consolidated statement of
operations for the year ended December 31, 2006 included compensation expense for share-based payment awards granted prior to, but not yet vested as of
December 25, 2005 based on the grant-date fair value estimated in accordance with the pro forma provisions of FASB Statement No. 123, Accounting for
Stock-Based Compensation, and compensation expense for the share-based payment awards granted subsequent to December 25, 2005 based on the grant-date
fair value estimated in accordance with the provisions of Statement 123(R). Compensation expense for all share-based payment awards was recognized using the
straight-line attribution method reduced for estimated forfeitures. The Company does not have sufficient historical forfeiture experience related to its own
stock-based awards. Therefore, the Company estimated forfeitures based on the average of its own fiscal 2006 forfeiture rate and AMD’s historical forfeiture
rates, as the Company believes these forfeiture rates to be the most indicative of its own expected forfeiture rate. Statement 123(R) requires forfeitures to be
estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. In the Company’s pro forma
information for the periods prior to fiscal 2006, the Company accounted for forfeitures as they occurred.
Pension and Post-retirement Benefits
The Company provides a pension plan for certain employees of Spansion Japan, and as a result, the Company has significant pension benefit costs and
credits that are computed and recorded in the Company’s financial statements based on actuarial valuations. The actuarial valuations require assumptions and
methods which must be used to develop the best estimate of the benefit costs. These valuation assumptions include salary growth, long-term return on plan
assets, discount rates and other factors. The salary growth assumptions reflect the Company’s future and near-term outlook for salary growth within the industry.
Long-term return on plan assets is determined based on historical results in the debt and equity markets and management’s expectation of the current economic
environment and the allocation target and expected future yields of each asset class. The discount rate assumption is based on current investment yields on
Japanese government long-term bonds, as no deep corporate market exists for high quality corporate debt instruments. Actual results that differ from these
assumptions are accumulated and amortized over the future life of the plan participants. While the Company believes that the assumptions used are appropriate,
significant differences in actual experience or significant changes in assumptions would affect the pension costs and obligations.
New Accounting Pronouncements
In June 2006, the Financial Accounting Standards Board (FASB) ratified the Emerging Issue Task Force (EITF) Issue No. 06-2, “Accounting for
Sabbatical Leave and Other Similar Benefits Pursuant to FASB
Source: ADVANCED MICRO DEVIC, 10-K, February 26, 2008