AMD 2008 Annual Report Download - page 108

Goodwill. Goodwill represents the excess of the purchase price over the fair value of net tangible and
identifiable intangible assets acquired. All of the Company’s goodwill at December 27, 2008 is related to the
Company’s acquisition of ATI (see Note 3). In accordance with the provisions of FASB Statement No. 142,
Goodwill and Other Intangible Assets (SFAS 142), goodwill amounts are not amortized, but rather are tested for
impairment at least annually, or more frequently if there are indicators of impairment present. The Company
performs its annual goodwill impairment analysis as of the first day of the fourth quarter of each fiscal year. The
Company evaluates whether goodwill has been impaired at the reporting unit level by first determining whether
the estimated fair value of the reporting unit is less than its carrying value and, if so, by determining whether the
implied fair value of goodwill within the reporting unit is less than the carrying value. Implied fair value of
goodwill is determined by considering both the income and market approach. While market valuation data for
comparable companies is gathered and analyzed, the Company believes that there has not been sufficient
comparability between the peer groups and the specific reporting units to allow for the derivation of reliable
indications of value using a market approach and, therefore, the Company has ultimately employed the income
approach which requires estimates of future operating results and cash flows of each of the reporting units
discounted using estimated discount rates.
Impairment of Long-Lived Assets including Acquisition-Related Intangible Assets. For long-lived assets
other than goodwill, the Company evaluates whether impairment losses have occurred when events and
circumstances indicate that the carrying amount of these assets might not be recoverable. The Company assesses
recoverability by determining whether the undiscounted cash flows estimated to be generated by those assets are
less than the carrying amounts of those assets. If less, the impairment losses are based on the excess of the
carrying amounts of these assets over their respective fair values. Their fair values would then 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 the fair value of the
assets 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.
Included in Other assets on the consolidated balance sheets are amounts related to certain technology
licenses not acquired in the acquisition of ATI. The balances related to such technology licenses, net of
amortization, were $222 million and $297 million at December 27, 2008 and December 29, 2007. Estimated
future amortization expense related to these licenses is as follows:
In millions
Fiscal Year
2009 ............................................................ $ 98
2010 ............................................................ 71
2011 ............................................................ 16
2012 ............................................................ 11
2013 ............................................................ 10
Thereafter ........................................................ 16
Total ............................................................ $222
Commitments and Contingencies. From time to time the Company is a defendant or plaintiff in various
legal actions that arise in the normal course of business. The Company is also a party to environmental matters,
including local, regional, state and federal government clean-up activities at or near locations where the
Company currently or has in the past conducted business. The Company is also a guarantor of various third-party
obligations and commitments. The Company is required to assess the likelihood of any adverse judgments or
outcomes to these matters as well as potential ranges of probable losses. A determination of the amount of
reserves required for these commitments and contingencies, if any, that would be charged to earnings, includes
assessing the probability of adverse outcomes and estimating the amount of potential losses. The required
reserves, if any, may change in the future due to new developments in each matter or changes in circumstances,
such as a change in settlement strategy. Changes in required reserves could increase or decrease the Company’s
earnings in the period the changes are made (see Notes 13 and 16).
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