AMD 2009 Annual Report Download - page 108

(3) At December 26, 2009, $348 million was included in cash and cash equivalents and $100 million was
included in marketable securities on the Company’s consolidated balance sheet. At December 27, 2008,
$236 million was included in cash and cash equivalents on the Company’s consolidated balance sheet.
(4) At December 26, 2009, $101 million was included in marketable securities, which includes $34 million of
securities classified as available-for-sale and $67 million classified as trading securities, and $58 million
was included in other assets, on the Company’s consolidated balance sheet. At December 27, 2008, $160
million was included in marketable securities on the Company’s consolidated balance sheet, which includes
$89 million of securities classified as available-for-sale and $71 million classified as trading securities.
(5) At December 26, 2009, $2 million was included in prepaid expenses and other current assets on the
Company’s consolidated balance sheet. At December 27, 2008, $11 million was included in other assets on
the Company’s consolidated balance sheet.
(6) At December 26, 2009, $29 million was included in marketable securities and $5 million was included in
other assets on the Company’s consolidated balance sheet. At December 27, 2008, $3 million was included
in marketable securities and $2 million was included in other assets on the Company’s consolidated balance
sheet.
(7) At December 26, 2009, $6 million of foreign currency deliverable contracts in a loss position was included
in accrued liabilities on the Company’s consolidated balance sheet. At December 27, 2008, $36 million was
included in accrued liabilities on the Company’s consolidated balance sheet, which includes $42 million of
foreign currency derivable contracts that were in a loss position and $6 million of contracts that were in a
gain position. (See Note 21, “Hedging Transactions and Derivative Financial Instruments”).
The Company carries financial instruments, except for its long term debt, at fair value. Investments in
money market mutual funds, commercial paper, time deposits and marketable equity securities and foreign
currency derivative contracts are primarily classified within Level 1 or Level 2. This is because such financial
instruments are valued primarily using quoted market prices or alternative pricing sources and models utilizing
market observable inputs, as provided to the Company by its brokers. The Company’s Level 1 assets are valued
using quoted prices for identical instruments in active markets. The Company’s Level 2 assets, all of which
mature within six months, are valued using broker reports that utilize quoted market prices for similar
instruments. The ARS investments and the UBS put option are classified within Level 3 because they are valued
using a discounted cash flow model. Some of the inputs to this model are unobservable in the market and are
significant. The Company’s foreign currency derivative contracts are classified within Level 2 because the
valuation inputs are based on quoted prices and market observable data of similar instruments in active markets,
such as currency spot and forward rates.
The continuing uncertainties in the credit markets have affected all of the Company’s ARS investments and
auctions for these securities have failed to settle on their respective settlement dates. As a result, reliable Level 1
or Level 2 pricing is not available for these ARS. In light of these developments, the Company performs its own
discounted cash flow analysis to value these ARS. The Company’s significant inputs and assumptions used in the
discounted cash flow model to determine the fair value of its ARS, as of December 26, 2009 and December 27,
2008, include interest rate, liquidity and credit discounts and estimated life of the ARS investments. The
outcomes of these activities indicated that the fair value of the ARS increased by $18 million as of December 26,
2009 when compared with the fair value as of December 27, 2008.
In October 2008, UBS AG (UBS) offered to repurchase all of the Company’s ARS that were purchased
from UBS prior to February 13, 2008. The Company has elected to account for the put option at fair value as
permitted by the fair value accounting guidance for such financial instruments. Accordingly, the Company
initially recorded the put option at its estimated fair value, with the corresponding gain recorded in earnings. The
put option is marked to market each quarter, with changes in its estimated fair value recorded in earnings. The
Company recorded losses of $9 million in other income (expense) during the year ended December 26, 2009, to
reflect the changes in fair value of the UBS put option. The Company’s significant inputs and assumptions used
in the discounted cash flow model to determine the fair value of this put option, as of December 26, 2009 and
December 27, 2008, include interest rate, credit discount and estimated life of the put option.
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