AMD 2008 Annual Report Download - page 69

The significant inputs and assumptions used in the discounted cash flow model to determine the fair value
of our ARS, as of December 27, 2008, are as follows:
• The discount rate was determined based on the average one-month LIBOR (2.34%) during the fourth
quarter of 2008, adjusted by 240 basis points (bps) to reflect the current market conditions for
instruments with similar credit quality at the date of valuation. In addition, the discount rate was
adjusted for a liquidity discount of 90 bps to reflect the market risk for these investments that has arisen
due to the lack of an active market.
• We assigned an additional credit risk discount of 200 bps to the discount rate for all ARS that are not
backed by the federal government. The total carrying value as of December 27, 2008 of investments not
backed by the federal government was approximately $32 million.
We applied the discount rate over the expected life of 17 years of the estimated cash flows of the ARS. The
projected interest income is based on the future contractual rates set forth in the individual prospectus for each of
the ARS.
Results of Operations
We review and assess operating performance using segment net revenues and operating income (loss)
before interest, other income (expense), equity in net loss of Spansion Inc. and other, income taxes and minority
interest. These performance measures include the allocation of expenses to the operating segments based on
management’s judgment.
From December 26, 2005 through October 24, 2006, we had two reportable segments:
• the Computation Products segment, which included microprocessors, AMD chipsets and related
revenue; and
• the Embedded Products segment, which included embedded processors and related revenue.
As a result of the acquisition of ATI, effective October 25, 2006, we had the following four reportable
segments through December 31, 2006:
• the Computation Products segment, which included microprocessors, AMD chipsets and related
revenue;
• the Embedded Products segment, which included embedded processors and related revenue;
• the Graphics and Chipsets segment, which included graphics, video and multimedia products and
chipsets sold by ATI prior to the acquisition and related revenue; and
• the Consumer Electronics segment, which included products used in handheld devices, digital
televisions and other consumer electronics products as well as related revenue and revenue for royalties
received in connection with sales of game console systems that incorporated our technology.
From the first quarter of 2007 through the first quarter of 2008, in conjunction with the integration of ATI’s
operations into ours, we began reviewing and addressing operating performance using the following three
reportable segments:
• the Computing Solutions segment, which included what was formerly the Computation Products
segment and the Embedded Products segment, as well as revenue from sales of ATI chipsets;
• the Graphics segment, which included graphics, video and multimedia products and related revenue; and
• the Consumer Electronics segment, which included products used in handheld devices, digital
televisions and other consumer electronics products, as well as revenue from royalties received in
connection with sales of game console systems that incorporate our graphics technology.
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