AMD 2011 Annual Report Download - page 99

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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 31,
2011
December 25,
2010
Carrying
amount
Estimated
Fair Value
Carrying
amount
Estimated
Fair Value
(In millions)
Short-term debt (excluding capital leases) ...................... $ 485 $ 490 $ — $ —
Long-term debt (excluding capital leases) ...................... $1,505 $1,619 $2,162 $2,326
The fair value of the Company’s short-term debt and 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 Company believes the fair value of its investment in GF approximates its carrying
value (described in Note 3). 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.
NOTE 8: Concentrations of Credit and Operation Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily
of investments in debt securities, trade receivables and derivative financial instruments used in hedging activities.
The Company places its investments with high credit quality financial institutions and, by policy, limits the
amount of credit exposure with any one financial institution. The Company invests in time deposits and
certificates of deposit from banks having combined capital, surplus and undistributed profits of not less than
$200 million. At the time an investment is made, investments in commercial paper and money market auction
rate securities of industrial firms and financial institutions are rated A1, P1 or better. Investments in tax-exempt
securities, including municipal notes and bonds, and corporate bonds that are rated A, A2 or better, and
investments in repurchase agreements must have securities of the type and quality listed above as collateral.
The Company believes that concentrations of credit risk with respect to trade receivables are limited
because a large number of geographically diverse customers make up the Company’s customer base, thus
spreading the trade credit risk. Accounts receivable from the Company’s top three customers accounted for
approximately 15%, 15% and 14% of the total consolidated accounts receivable balance as of December 31,
2011 and 18%, 11%, and 8% of the total consolidated accounts receivable balance as of December 25, 2010.
However, the Company does not believe the receivable balance from these customers represents a significant
credit risk based on past collection experience. The Company manages its exposure to customer credit risk
through credit limits, credit lines, monitoring procedures and credit approvals. Furthermore, the Company
performs in-depth credit evaluations of all new customers and, at intervals, for existing customers. From this, the
Company may require letters of credit, bank or corporate guarantees or advance payments, if deemed necessary.
The Company’s existing derivative financial instruments are with four large international financial
institutions of investment grade credit rating. The Company does not believe that there is significant risk of
nonperformance by these counterparties because the Company monitors their credit rating on an ongoing basis.
By using derivative instruments, the Company is subject to credit and market risk. If a counterparty fails to fulfill
its performance obligations under a derivative contract, the Company’s credit risk will equal the fair value of the
derivative instrument. Generally, when the fair value of a derivative contract is positive, the counterparty owes
the Company, thus creating a receivable risk for the Company. Based upon certain factors, including a review of
the credit default swap rates for the Company’s counterparties, the Company determined its counterparty credit
risk to be immaterial. At December 31, 2011, the Company’s obligations under the contracts exceed the
counterparties’ obligations by approximately $2 million.
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