AMD 2007 Annual Report Download - page 281

Spansion Inc.
Notes to Condensed Consolidated Financial Statements - Continued
(Unaudited)
Use of Estimates
The preparation of financial statements and disclosures in conformity with U.S. generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of commitments and contingencies and the reported amounts of
revenues and expenses during the reporting periods. In particular, management makes estimates related to revenues, allowance for doubtful accounts, inventories,
asset impairments, income taxes and pension expenses. Actual results may differ from those estimates, and such differences may be material to the financial
statements.
Financial Statement Reclassifications
Certain prior period amounts in the condensed consolidated statements of operations have been reclassified to conform to the current period presentation.
These reclassifications do not affect the Company’s gross margin or operating results.
Sabbatical Leave Program
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 Statement No. 43. Issue 06-2 provides guidelines under which sabbatical leave or other similar benefits
provided to an employee are considered to accumulate. If such benefits are deemed to accumulate, they should be accrued for as compensation expense over the
employee’s requisite service period. The provisions of this Issue are effective for fiscal years beginning after December 15, 2006 and allow for either
retrospective application or a cumulative effect adjustment approach upon adoption. The Company adopted this Issue beginning January 1, 2007 using the
cumulative effect adjustment approach. The adoption of this Issue resulted in an increase to the Company’s accumulated deficit of approximately $10.0 million
as of the beginning of fiscal 2007. The effect of this change on the Company’s condensed consolidated statements of operations for the three and nine months
ended September 30, 2007 is not material.
The Company’s Sabbatical Program provides for eight weeks of paid leave for salaried (exempt) employees in the United States upon the completion of
seven years of service. In addition, the Company’s Recognition Trip Program provides for one week of paid leave and a fixed cash compensation for hourly
(non-exempt) employees in the United States who have completed seven years of service. Prior to the adoption of the Issue, the Company accounted for the
above programs only after the completion of the seven years by the eligible employees because none of the benefits vest or accrete to the employee until
completion of the full seven years of service. With the adoption of Issue 06-2, the Company accounts for the programs by recording the estimated total program
payouts upon attaining the requisite service conditions as compensation expense ratably over each employee’s requisite service period.
Income Taxes
In July 2006, the FASB issued Financial Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income Taxes, which clarifies the accounting for
uncertainty in income taxes recognized in a company’s financial statements in accordance with FASB Statement No. 109, Accounting for Income Taxes. The
interpretation prescribes a recognition threshold and measurement attribute criteria for the financial statement recognition and measurement of a tax position
taken or expected to be taken in a tax return. The interpretation also provides guidance on
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Source: ADVANCED MICRO DEVIC, 10-K, February 26, 2008