AMD 2012 Annual Report Download - page 55

variety of external and internal factors. Potential events or circumstances that could reasonably be expected to
negatively affect the key assumptions we used in estimating the fair value of our Computing Solutions reporting
unit include adverse changes in our industry, increased competition, an inability to successfully introduce new
products in the marketplace or to achieve internal forecasts, and further decline in our stock price. If the
estimated fair value of our Computing Solutions reporting unit declines due to any of these factors, we may be
required to record future goodwill impairment charges.
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. We recognize potential accrued interest and penalties related to
unrecognized tax benefits as interest expense and income tax expense.
Results of Operations
Management, including the Chief Operating Decision Maker, who is our Chief Executive Officer, reviews
and assesses our operating performance using segment net revenue and operating income (loss) before interest,
other income (expense), net and income taxes. These performance measures include the allocation of expenses to
the operating segments based on management’s judgment.
We use the following two reportable operating segments:
• the Computing Solutions segment, which includes microprocessors, as standalone devices or as
incorporated as an APU, chipsets and embedded processors; and
• the Graphics segment, which includes graphics, video and multimedia products developed for use in
desktop and notebook computers, including home media PCs, professional workstations and servers as
well as revenue received in connection with the development and sale of game console systems that
incorporate our graphics technology.
In addition to these reportable segments, we have an All Other category, which is not a reportable segment.
This category includes certain expenses and credits that were not allocated to any of the operating segments
because management does not consider these expenses and credits in evaluating the performance of the operating
segments. Also included in this category are amortization of acquired intangible assets, stock-based
compensation expense, restructuring charges and a charge related to the limited waiver of exclusivity from GF.
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.
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