AMD 2010 Annual Report Download - page 104

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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. As of December 25, 2010 and December 26, 2009, the
Company’s significant inputs and assumptions used in the discounted cash flow model to determine the fair value
of its ARS, include interest rate, liquidity and credit discounts and the estimated life of the ARS investments. The
outcomes of these activities indicated that the fair value of the ARS decreased by $7 million as of December 25,
2010 when compared with the fair value as of December 26, 2009, which the Company included in other
comprehensive loss.
In October 2008, UBS offered to repurchase all of the Company’s ARS that were purchased from UBS prior
to February 13, 2008. The Company accepted this offer. From June 30, 2010 through July 2, 2012, the Company
had the right, but not the obligation, to sell, at par, these ARS to UBS. The Company had 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 was marked to market each quarter, with changes in its estimated fair
value recorded in earnings. The Company recorded a loss of $2 million and $9 million, respectively, during the
year ended December 25, 2010 and the year ended December 26, 2009 to reflect the change in fair value of the
UBS put option. The UBS put option became exercisable on June 30, 2010; however, UBS redeemed all of its
ARS without the Company exercising the option. As of December 25, 2010, the Company did not own any UBS
ARS and, therefore, the put option had no value.
The roll-forward of the financial assets measured at fair value on a recurring basis using significant
unobservable inputs (Level 3) is as follows:
December 25, 2010 December 26, 2009
Auction
Rate Securities
UBS
Put Option
Auction
Rate Securities
UBS
Put Option
(In millions)
Beginning balance ............................ $159 $ 2 $160 $11
Redemption at par ............................. (98) — (19) —
Gain (loss) included in net income (loss) ........... 3 (2) 10 (9)
Change in fair value included in other comprehensive
income (loss) ............................... (7) — 8 —
Ending balance ............................... $ 57 $— $159 $ 2
Financial Instruments Not Recorded at Fair Value on a Recurring Basis. Financial instruments that are
not recorded at fair value are measured at fair value quarterly for disclosure purposes. The carrying amounts and
estimated fair values of financial instruments not recorded at fair value are as follows:
December 25, 2010 December 26, 2009
Carrying
amount
Estimated
Fair Value
Carrying
amount
Estimated
Fair Value
(In millions)
Long-term debt (excluding capital leases) ................... $2,162 $2,326 $4,303 $4,046
The fair value of the Company’s long-term debt is estimated based on the quoted market prices for the same
or similar issues or on the current rates offered to the Company for debt of the same remaining maturities. The
fair value of the Company’s accounts receivable, accounts payable and other short-term obligations approximate
their carrying value based on existing payment terms.
96