AMD 2012 Annual Report Download - page 85

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NOTE 3: GLOBALFOUNDRIES
Formation and Accounting in 2009
On March 2, 2009, the Company consummated the transactions contemplated by the Master Transaction
Agreement among the Company, Advanced Technology Investment Company LLC (ATIC), and WCH, pursuant
to which the Company formed GLOBALFOUNDRIES, Inc. (GF). Based on the structure of the transaction and
the guidance on accounting for interests in variable interest entities, during 2009, GF was deemed a variable-
interest entity, and the Company was deemed to be the primary beneficiary. Therefore, the Company
consolidated the accounts of GF from March 2, 2009 through December 26, 2009.
At the Closing, AMD, ATIC and GF also entered into a Shareholders’ Agreement (the Shareholders’
Agreement), a Funding Agreement (the Funding Agreement), and a Wafer Supply Agreement (the WSA).
Shareholders’ Agreement. The Shareholders’ Agreement set forth the rights and obligations of AMD and
ATIC as shareholders of GF. The initial GF board of directors (GF Board) consisted of eight directors, and AMD
and ATIC each designated four directors. The Company was no longer a party to the Shareholders’ Agreement as
of March 4, 2012.
Funding Agreement. The Funding Agreement provided for the funding of GF and governed the terms and
conditions under which ATIC was obligated to provide such funding. The Company was no longer a party to the
Funding Agreement as of March 4, 2012.
Wafer Supply Agreement. The WSA governs the terms by which the Company purchases products
manufactured by GF. Pursuant to the WSA, during 2010, the Company purchased substantially all of its
microprocessor unit (MPU) product requirements from GF. During 2010, the Company paid GF for wafers on a
cost-plus basis. If the Company acquires a third-party business that manufactures MPU products, the Company
will have up to two years to transition the manufacture of such MPU products to GF.
The WSA terminates no later than March 2, 2024. GF has agreed to use commercially reasonable efforts to
assist the Company to transition the supply of products to another provider, and to continue to fulfill purchase
orders for up to two years following the termination or expiration of the WSA. During the transition period,
pricing for microprocessor products will remain as set forth in the WSA, but the Company’s purchase
commitments to GF will no longer apply. The agreement has been subsequently modified, as described below.
Governance Changes, Funding and Accounting in 2010
Deconsolidation of GF
On December 18, 2009, ATIC International Investment Company (ATIC II) acquired Chartered
Semiconductor Manufacturing Ltd. (Chartered). On December 28, 2009, with the Company’s consent, ATIC II,
Chartered and GF entered into a Management and Operating Agreement (MOA), which provided for the joint
management and operation of GF and Chartered, thereby allowing GF and Chartered to share costs, take
advantage of operating synergies and market wafer fabrications services on a collective basis. In order to allow
for the signing of the MOA on December 28, 2009, prior to obtaining any regulatory approvals, the Company
agreed to irrevocably waive rights under the Shareholders Agreement with respect to certain matters that require
unanimous GF Board approval. Additionally, if any such matters came before the GF Board, the Company
agreed that its designated GF directors will vote in the same manner as the majority of ATIC-designated GF
Board members voting on any such matters. As a result of waiving such approval rights, as of December 28,
2009, for financial reporting purposes the Company no longer shared control with ATIC over GF.
In June 2009, the FASB issued an amendment to improve financial reporting by enterprises involved with
variable interest entities. Based on the results of the Company’s evaluation and in light of the governance
changes whereby the Company believed it only had protective rights relative to the operations of GF, the
Company concluded that the other investor in GF, ATIC, was the party who had the power to direct the activities
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