AMD 2007 Annual Report Download - page 90

Table of Contents
noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an ownership interest
in the consolidated entity that should be reported as equity in the consolidated financial statements. It requires consolidated net income to be reported at amounts
that include the amounts attributable to both the parent and the noncontrolling interest. This Statement establishes a single method of accounting for changes in a
parent’s ownership interest in a subsidiary that do not result in deconsolidation. SFAS 160 is effective for fiscal years beginning after December 15, 2008. We
are currently evaluating the impact of SFAS 160 on our consolidated financial position, results of operations and cash flows.
Recently Adopted Accounting Pronouncements
In June 2006, the Financial Accounting Standards Board issued Interpretation No.48, Accounting for Uncertainty in Income Taxes, an Interpretation of
FAS 109, Accounting for Income Taxes (FIN 48). FIN 48 clarifies the accounting for income taxes by prescribing a minimum recognition threshold a tax position
is required to meet before being recognized in the financial statements. FIN 48 also provides guidance on derecognition, measurement, classification, interest and
penalties, accounting in interim periods, disclosure and transition. We adopted FIN 48 as of January 1, 2007 as required. The cumulative effect of applying FIN
48 was reported as a reduction of the beginning balance of retained earnings of six million and a decrease to goodwill of three million.
As of the date of adoption, our total gross unrecognized tax benefits were $149 million, of which $28 million, if recognized, would affect the effective tax
rate. The recognition of the remaining unrecognized tax benefits would be reported as an adjustment to goodwill to the extent of pre-acquisition unrecognized tax
benefits or would be offset by a change in valuation allowance.
We recognize potential accrued interest and penalties related to unrecognized tax benefits as interest expense and income tax expense, respectively. We
accrued interest and penalties of $21 million and $38 million, respectively, as of the date of adoption of FIN 48.
As of the date of adoption of FIN 48, tax years 1994 – 2006 remain subject to examination in the U.S., 1999 – 2006 in Canada and 1999 – 2006 in various
foreign jurisdictions.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Interest Rate Risk. Our exposure to market risk for changes in interest rates relates primarily to our investment portfolio and long-term debt. We usually
invest our cash in investments with short maturities or with frequent interest reset terms. Accordingly, our interest income fluctuates with short-term market
conditions. As of December 29, 2007, substantially all of our investments in our portfolio were highly liquid investments and consisted primarily of bank notes,
short-term corporate notes, money market auction rate preferred stocks and short-term federal agency notes.
In April 2007, we issued $2.2 billion aggregate principal amount of 6.00% Notes. The 6.00% Notes bear interest at 6.00% per annum. Interest is payable in
arrears on May 1 and November 1 of each year beginning November 1, 2007 until the maturity date of May 1, 2015 unless the 6.00% Notes are repurchased or
converted prior to the maturity date. We used $500 million of the net proceeds to repay a portion of the amounts outstanding under our October 2006 Term Loan.
As a result of this partial repayment, the margin on the interest rate for the October 2006 Term Loan was reduced from 2.25 percent to 2.00 percent. Of the
remaining net proceeds, approximately $1.5 billion was invested in investments with short maturities or with frequent interest reset terms and $182 million was
used to purchase a capped call associated with the sale and issuance of our 6.00% Notes.
In August 2007, we issued $1.5 billion aggregate principal amount of 5.75% Notes. The 5.75% Notes bear interest at 5.75% per annum. Interest is payable
in arrears on February 15 and August 15 of each year beginning February 15, 2008 until the maturity date of August 15, 2012 unless the 5.75% Notes are
repurchased or
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Source: ADVANCED MICRO DEVIC, 10-K, February 26, 2008