AMD 2008 Annual Report Download - page 112

The Company incurred a net loss for 2008, 2007 and 2006. Potential common shares from stock awards
totaling approximately 69 million and 54 million, along with approximately 75 million of common shares
issuable under the Company’s 5.75% Convertible Senior Notes due 2012 for the year ended December 27, 2008
and December 29, 2007, respectively, were not included in the net loss per common share calculation, as their
inclusion would have been antidilutive. Potential common shares from stock awards totaling approximately
55 million for the year ended December 31, 2006, were not included in the net income per common share
calculation, as their inclusion would have been antidilutive.
Accumulated Other Comprehensive Income (Loss). Unrealized holding gains or losses on the Company’s
available-for-sale securities, unrealized holding gains and losses on derivative financial instruments qualifying as
cash flow hedges, changes in minimum pension liabilities, and foreign currency translation adjustments are
included in accumulated other comprehensive income (loss).
The following are the components of accumulated other comprehensive income:
2008 2007
(In millions)
Net unrealized holding gains on available-for-sale securities, net of taxes of
$0 in 2008 and $1 in 2007 ...................................... $ — $ 2
Net unrealized holding gains (losses) on cash flow hedges, net of taxes of
$3 in 2008 and $0 in 2007 ...................................... (29) 21
Minimum pension liability ....................................... (4) (1)
Cumulative translation adjustments ................................ 141 141
$108 $163
Stock-Based Compensation. The Company estimates stock-based compensation cost for stock options at
the grant date based on the award’s fair-value as calculated by the lattice-binomial option-pricing model. For
restricted stock units and awards, fair value is based on the closing price of the Company’s common stock on the
grant date. The expense is being recognized using the single option method which is ratable on a straight-line
basis over the requisite service period.
The application of the lattice-binomial option-pricing model requires the use of extensive actual employee
exercise behavior data and the use of a number of complex assumptions including expected volatility of the
Company’s common stock, risk-free interest rate, and expected dividends. Significant changes in any of these
assumptions could materially affect the fair value of stock options granted in the future.
Forfeiture rates are estimated at the time of grant and revised, if necessary, in subsequent periods if actual
forfeitures differ from those estimates in order to derive the Company’s best estimate of awards ultimately
expected to vest.
Fair Value Measurements. In September 2006, the FASB issued Statement No. 157, Fair Value
Measurements (SFAS 157). This statement does not require any new fair value measurements but clarifies the
fair value definition, establishes a fair value hierarchy that prioritizes the information used to develop
assumptions for measuring fair value, and expands disclosures about fair value measurements. SFAS 157
clarifies that fair value is the exchange price in an orderly transaction between market participants to sell the
asset or transfer the liability in the market. The fair value hierarchy gives the highest priority to quoted prices in
active markets for identical assets or liabilities (Level 1 input), then to quoted prices (in non-active markets or in
active markets for similar assets or liabilities), inputs other than quoted prices that are observable for the asset or
liability, and inputs that are not directly observable, but that are corroborated by observable market data for the
asset or liability (Level 2 input), then the lowest priority to unobservable inputs, for example, the Company’s
own data about the assumptions that market participants would use in pricing an asset or liability (Level 3 input).
It emphasizes that fair value is a market-based measurement, not an entity-specific measurement, and a fair value
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