AMD 2008 Annual Report Download - page 110

contracts, when recognized, offsets the gain or loss on the hedged transactions. As of December 27, 2008, the
Company expects to reclassify the amount accumulated in other comprehensive income to operations within the
next twelve months upon the recognition in operations of the hedged forecasted transactions. The Company does
not use derivatives for speculative or trading purposes.
The effectiveness test for these foreign currency contracts utilized by the Company is the change in fair
value method. Under this method, the Company includes the time value portion of the change in value of the
currency forward contract in its effectiveness assessment. Any ineffective portion of the hedges is recognized
currently in other income (expense), net, which has not been significant to date.
If a cash flow hedge is discontinued and it is probable that the original forecasted transaction will not occur,
the net unrealized gain or loss will be recorded as a component of other income (expense), net.
Premiums paid for foreign currency forward and option contracts are immediately charged to earnings.
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 for financial
reporting purposes. Estimated useful lives for financial reporting purposes are as follows: equipment, two to six
years; buildings and building improvements, up to 39 years; and leasehold improvements, measured by the
shorter of the remaining terms of the leases or the estimated economic useful lives of the improvements.
Product Warranties. The Company generally warrants that microprocessor products sold to its customers
will, at the time of shipment, be free from defects in workmanship and materials and conform to its approved
specifications. Subject to certain exceptions, the Company generally offers a three-year limited warranty to end
users for microprocessor products commonly referred to as “processors in a box,” a one-year limited warranty to
direct purchasers of all other microprocessor products commonly referred to as “tray” microprocessor products,
and a one-year limited warranty to direct purchasers of embedded processor products. The Company has offered
extended limited warranties to certain customers of “tray” microprocessor products who have written agreements
with the Company and target their computer systems at the commercial and/or embedded markets.
The Company generally warrants that its graphics and chipsets will conform to its approved specifications and
be free from defects in material and workmanship under normal use and service for a period of one year beginning
on shipment of such products to its customers. The Company generally warrants that ATI-branded PC workstation
products will conform to its approved specifications and be free from defects in material and workmanship under
normal use and service for a period of three years, beginning on shipment of such products to its customers.
The Company accrues warranty costs at the time of sale of warranted products.
Foreign Currency Translation/Transactions. The functional currency of all the Company’s foreign
subsidiaries is the U.S. dollar. Assets and liabilities denominated in non-U.S. dollars have been remeasured into
U.S. dollars at current exchange rates for monetary assets and liabilities and historical exchange rates for
non-monetary assets and liabilities. Net revenue, cost of sales and expenses have been remeasured at average
exchange rates in effect during each period, except for those cost of sales and expenses related to the previously
noted non-monetary balance sheet amounts, which have been remeasured at historical exchange rates. The gains
or losses from foreign currency remeasurement have been included in earnings.
The Company continued to include its proportionate share of the translation adjustments relating to
Spansion Japan in accumulated other comprehensive income (loss) until September 20, 2007, when the Company
changed its method of accounting for Spansion from the equity method to treating this investment as an
available-for-sale security (see Note 4).
The gains or losses resulting from transactions denominated in currencies other than the functional currency
have been recorded in earnings.
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