AMD 2010 Annual Report Download - page 61

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During 2009 and 2008, we recorded grants and allowances received from the State of Saxony and the
Federal Republic of Germany in connection with the manufacturing facilities in Dresden, Germany as long-term
liabilities on our consolidated financial statements. We amortized these amounts as they were earned as a
reduction to operating expenses. The amortization of the production related grants and allowances was recorded
as a credit to cost of sales. The credit to cost of sales totaled $46 million in 2009 and $86 million in 2008. The
fluctuations in the recognition of these credits did not significantly impact our consolidated gross margins. With
the deconsolidation of GF as of the beginning of 2010, our consolidated financial statements no longer directly
reflected such credits to cost of sales. However, these credits had a favorable impact on the amounts that we paid
GF pursuant to the Wafer Supply Agreement.
Expenses
Research and Development Expenses
Research and development expenses of $1.4 billion in 2010, decreased by $316 million, or 18%, compared
to $1.7 billion in 2009. In 2009, research and development expenses included $524 million in research and
development expenses related to the Foundry segment. Without taking into account the research and
development expenses attributable to the Foundry segment, which are not indicative of our ongoing performance,
research and development expenses would have increased by $208 million in 2010 as compared to 2009. This
increase was due to a $224 million increase in research and development expenses attributable to our Computing
Solutions segment and a $22 million increase in research and development expenses attributable to our Graphics
segment, partially offset by a $38 million decrease in research and development expenses attributable to our All
Other category. The increase in research and development expenses attributable to our Computing Solutions
segment was primarily due to a $91 million increase in product engineering and design costs for our future
products, a $68 million increase in employee benefit and compensation expense and a $64 million increase in
manufacturing process technology expenses related to GF for our future products. The increase in research and
development expenses attributable to our Graphics segment was primarily due to a $33 million increase in
employee benefit and compensation expense, partially offset by a $13 million decrease in product engineering
and design costs due to lower material costs used in 2010. The decrease in research and development expenses
attributable to our All Other category was primarily because of lower research and development expenses related
to handheld products because we no longer develop these products.
Research and development expenses decreased $127 million, or 7%, from $1.8 billion in 2008 to
$1.7 billion in 2009. This decrease was primarily due to a $193 million decrease in product engineering and
design costs, which reflected our efforts to reduce operating expenses, and was partially offset by a $62 million
increase in manufacturing process technology expenses mainly incurred by GF.
In 2009, GF applied for subsidies relating to certain research and development projects, and in 2008 we
applied for these subsidies. We recorded these research and development subsidies in our consolidated financial
statements as a reduction of research and development expenses when all conditions and requirements set forth in
the subsidy allowance were met. The credit to research and development expenses was $46 million in 2009 and
$36 million in 2008. With the deconsolidation of GF in 2010, we no longer record these credits in our
consolidated financial statements.
Marketing, General and Administrative Expenses
Marketing, general and administrative expenses of $934 million in 2010, decreased by $60 million, or 6%,
compared to $994 million in 2009. Marketing, general and administrative expenses in 2009 included $116
million attributable to the Foundry segment. Without taking into account the marketing, general and
administrative expenses attributable to the Foundry segment, which are not indicative of our ongoing
performance, marketing, general and administrative expenses would have increased by $56 million. This increase
was due to a $61 million increase in marketing, general and administrative expenses attributable to our
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