AMD 2008 Annual Report Download - page 118

Goodwill and Acquisition-Related Intangible Assets
The changes in the carrying amounts of goodwill by segment for 2007 and 2008 were as follows:
Computing
Solutions Graphics All Other(1) Total
(In millions)
Balance at December 31, 2006 ............................. $— $1,237 $1,007 $2,244
Reclassification due to change in segments ................... 166 (166) — —
Goodwill adjustments(2) .................................. (4) (34) (7) (45)
Impairment charges(3) .................................... — (504) (409) (913)
Balance at December 29, 2007 ............................. $162 $ 533 $ 591 $1,286
Reclassification due to change in segments ................... — 254 (254) —
Goodwill adjustments(2) .................................. (1) (3) (1) (5)
Impairment charges(3) .................................... (161) (461) (336) (958)
Balance at December 27, 2008 ............................. $— $ 323 $ — $ 323
(1) Includes goodwill related to the Handheld business unit. Goodwill related to the Digital Television business
unit has been excluded due to its discontinued operations classification. The amount of goodwill excluded
from the balance as of December 31, 2006 related to the Digital Television business unit was $973 million.
(2) Adjustments to goodwill primarily represented changes in assumed pre-acquisition income tax liabilities as
a result of the ATI acquisition, which will continue to be applied to goodwill until ultimately settled with the
tax authorities or until the Company adopts the provisions of SFAS 141(R) at the beginning of fiscal year
2009, after which changes will be recorded in the statement of operations.
(3) The Company’s Chief Operating Decision Maker does not consider certain expenses, including goodwill
impairment, in evaluating the performance of reportable segments. Accordingly, the Computing Solutions
and Graphics impairment charges are not included in Computing Solutions and Graphics operating income
(loss) in the Company’s segment disclosures in Note 10.
2007 Impairment
In the fourth quarter of 2007, pursuant to its accounting policy, the Company performed an annual
impairment test of goodwill. As a result of this analysis, the Company concluded that the carrying amounts of
goodwill included in its Graphics and former Consumer Electronics segments exceeded their implied fair values
and recorded an impairment charge of approximately $1.26 billion, of which $913 million is included in the
caption “Impairment of goodwill and acquired intangible assets” and $346 million is included in the caption
“Income (loss) from discontinued operations, net of tax” in its 2007 consolidated statement of operations. The
impairment charge was determined by comparing the carrying value of goodwill assigned to the Company’s
reporting units within these segments as of October 1, 2007, with the implied fair value of the goodwill. The
Company considered both the income and market approaches in determining the implied fair value of the
goodwill. While market valuation data for comparable companies was gathered and analyzed, the Company
concluded that there was not 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
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 ranging from 13 percent to 15 percent. The
estimates of future operating results and cash flows were principally derived from an updated long-term financial
forecast, which was developed as part of the Company’s strategic planning cycle conducted annually during the
latter part of the third quarter of 2007. The decline in the implied fair value of the goodwill and resulting
impairment charge was primarily driven by the updated long-term financial forecasts, which showed lower
estimated near-term and longer-term profitability compared to estimates developed at the time of the completion
of the ATI acquisition.
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