AMD 2009 Annual Report Download - page 56

Impairment of Long-Lived Assets including Acquired Intangible Assets. We consider quarterly whether
indicators of impairment of long-lived assets and intangible assets are present. These indicators may include, but
are not limited to, significant decreases in the market value of an asset and significant changes in the extent or
manner in which an asset is used. If these or other indicators are present, we test for recoverability of the asset by
determining whether the estimated undiscounted cash flows attributable to the assets in question are less than
their carrying value. If less, we recognize an impairment loss based on the excess of the carrying amount of the
assets over their respective fair values. Fair value is determined by discounted future cash flows, appraisals or
other methods. Significant judgment is involved in estimating future cash flows and deriving the discount rate,
which ranges from 18 percent to 30 percent, to apply to the estimated future cash flows, and in evaluating the
results of appraisals or other valuation methods. If the asset determined to be impaired is to be held and used, we
recognize an impairment loss through a charge to our operating results which also reduces the carrying basis of
the related asset. The new carrying value of the related asset is depreciated or amortized over the remaining
estimated useful life of the asset. We also must make subjective judgments regarding the remaining useful life of
the asset. We may incur additional impairment losses in future periods if factors influencing our estimates of the
undiscounted cash flows change. For assets held for sale, impairment losses are measured at the lower of the
carrying amount of the assets or the fair value of the assets less costs to sell. For assets to be disposed of other
than by sale, impairment losses are measured as their carrying amount less salvage value, if any, at the time the
assets cease to be used.
Income Taxes. In determining taxable income for financial statement reporting purposes, we must make
certain estimates and judgments. These estimates and judgments are applied in the calculation of certain tax
liabilities and in the determination of the recoverability of deferred tax assets, which arise from temporary
differences between the recognition of assets and liabilities for tax and financial statement reporting purposes.
We must assess the likelihood that we will be able to recover our deferred tax assets. If recovery is not
likely, we must increase our charge to income tax expense, in the form of a valuation allowance, for the deferred
tax assets that we estimate will not ultimately be recoverable. We consider past performance, future expected
taxable income and prudent and feasible tax planning strategies in determining the need for a valuation
allowance.
In addition, the calculation of our tax liabilities involves dealing with uncertainties in the application of
complex tax rules and the potential for future adjustment of our uncertain tax positions by the Internal Revenue
Service or other taxing jurisdiction. If our estimates of these taxes are greater or less than actual results, an
additional tax benefit or charge will result.
Results of Operations
We intend the discussion of our financial condition and results of operations that follows to provide
information that will assist you in understanding our financial statements, the changes in certain key items in
those financial statements from year to year, the primary factors that resulted in those changes, and how certain
accounting principles, policies and estimates affect our financial statements.
We review and assess operating performance using segment net revenues and operating income (loss)
before interest, other income (expense), net, equity in net income (loss) of investees and income taxes. These
performance measures include the allocation of expenses to the operating segments based on management’s
judgment.
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 microprocessors, chipsets and embedded processors
and related revenue;
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