AMD 2010 Annual Report Download - page 87

estimated fair value of the reporting unit is less than its carrying value and, if so, by determining whether the
implied fair value of goodwill within the reporting unit is less than the carrying value. Implied fair value of
goodwill is determined by considering both the income and market approach.
Impairment of Long-Lived Assets including Acquired Intangible Assets. For long-lived assets other than
goodwill, the Company evaluates whether impairment losses have occurred when events and circumstances
indicate that the carrying amount of these assets might not be recoverable. The Company assesses recoverability
by determining whether the undiscounted cash flows estimated to be generated by those assets are less than the
carrying amounts of those assets. If less, the impairment losses are based on the excess of the carrying amounts
of these assets over their respective fair values. Their fair values would then become the new cost basis. Fair
value is determined by discounted future cash flows, appraisals or other methods. 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.
Commitments and Contingencies. From time to time the Company is a defendant or plaintiff in various
legal actions that arise in the normal course of business. The Company is also a party to environmental matters,
including local, regional, state and federal government clean-up activities at or near locations where the
Company currently or has in the past conducted business. The Company is also a guarantor of various third-party
obligations and commitments. The Company is required to assess the likelihood of any adverse judgments or
outcomes to these matters as well as potential ranges of reasonably possible losses. A determination of the
amount of reserves required for these commitments and contingencies, if any, that would be charged to earnings,
includes assessing the probability of adverse outcomes and estimating the amount of potential losses. The
required reserves, if any, may change in the future due to new developments in each matter or changes in
circumstances such as a change in settlement strategy. Changes in required reserves could increase or decrease
the Company’s earnings in the period the changes are made (see Notes 16 and 17).
Cash Equivalents. Cash equivalents consist of financial instruments that are readily convertible into cash
and have original maturities of three months or less at the time of purchase.
Investments in Certain Debt and Equity Securities. The Company classifies its investments in debt and
marketable equity securities at the date of acquisition as either held to maturity, available-for-sale or trading
securities. Held to maturity securities are carried at amortized cost. Unrealized holding gains and losses are not
reported in the financial statements until realized or until a decline in fair value below cost is deemed to be other-
than-temporary. Available-for-sale securities are reported at fair value with the related unrealized gains and
losses included, net of tax, in other comprehensive income (loss), a component of stockholders’ equity. Realized
gains and losses and declines in the value of available-for-sale securities determined to be other than temporary
are included in other income (expense), net. Trading securities are reported at fair value with changes in the
related unrealized gains and losses included in earnings. The cost of securities sold is determined based on the
specific identification method.
The Company classifies investments in debt securities with remaining time to maturity of more than three
months as marketable securities on its consolidated balance sheets. Classification of these securities as current
versus long-term depends on whether the Company has the intent and ability to sell these securities within 12
months. Investments in debt securities with remaining time to maturity greater than 12 months are classified as
current when they represent investments of cash that are intended for use in current operations within the next
twelve months.
Derivative Financial Instruments. The Company maintains a foreign currency hedging strategy, which
uses derivative financial instruments to mitigate the risks associated with changes in foreign currency exchange
rates. This strategy takes into consideration all of the Company’s consolidated exposures. The Company does not
use derivative financial instruments for trading or speculative purposes.
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