AMD 2008 Annual Report Download - page 127

In addition, the Company has reclassified the underlying ARS, with an estimated fair value of $71 million as
of December 27, 2008, that the Company purchased from UBS from the “available-for-sale” category to the
“trading securities” category. Future changes in estimated fair value of these ARS will be recorded in earnings.
As of December 27, 2008, the Company classified its investments in ARS as current assets because it
reasonably expects that it will be able to sell these securities and have the proceeds available for use in its
operations within the next twelve months. Although there may not be successful future auctions, the Company
reasonably expects there to be other channels through which it reasonably expects to sell the ARS. Specific
factors the Company considered in determining that its ARS should be classified as short-term marketable
securities and included as current assets are as follows:
• The Company has had redemptions, at par, totaling $26 million throughout the period of failed auctions.
• The Company is receiving above market rates of interest on the ARS without any default. The Company
believes the issuers have an incentive to refinance because of higher interest rates compared with market
rates demonstrated by redemptions the Company received during the year.
• Federal and state governments are stepping in to provide guaranteed new student loans, as well as
purchasing the loans, which the Company believes will create a secondary market for these securities.
• In informal discussions with staff members at brokerage firms, the Company has been informed that
brokerage firms continue in their efforts to create a new market for these securities by working with
issuers to refinance the existing instruments into a new form of security or reducing the maturity to
attract investors.
With respect to $82 million of its ARS holdings, prior to June 30, 2010, UBS, at its sole discretion, may sell,
or otherwise dispose of, and/or enter orders in the auctions process with respect to these securities on the
Company’s behalf so long as the Company receives par value for the ARS sold. UBS has also agreed to use its
best efforts to facilitate issuer redemptions and/or to resolve the liquidity concerns of holders of their ARS
through restructurings and other means.
Reconciliation of the financial assets measured at fair value on a recurring basis using significant
unobservable inputs (Level 3):
Year Ended December 27, 2008 Fair Value
Measurements Using Significant Unobservable Inputs
(Level 3)
Auction Rate Securities UBS Put Option
(In millions)
Beginning balance ............................ $269(1) $—
Sales at par through February 23, 2008 ............ (59) —
Balance as of February 23, 2008 ................. 210
(2) —
Redemption at par ............................ (26) —
Other than temporary impairment ................ (24) —
UBS put option ............................... — 11
Ending balance ............................... $160 $ 11
Gain (loss) for period included in earnings
attributable to the level 3 financial assets still held
at December 27, 2008. ....................... $(24) $ 11
(1) Classified as Level 2 input.
(2) Reclassified as Level 3 input due to illiquidity of the ARS market.
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