AMD 2013 Annual Report Download - page 92

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With the exception of its long-term debt, the Company carries its financial instruments at fair value.
Investments in money market funds, commercial paper, time deposits, marketable equity securities, corporate
bonds, mutual funds and foreign currency derivative contracts are classified within Level 1 or Level 2. This is
because such financial instruments are valued primarily using quoted market prices or alternative pricing sources
and models utilizing market observable inputs, as provided to the Company by its brokers. The Company’s Level
1 assets are valued using quoted prices for identical instruments in active markets. The Company’s Level 2 short-
term investments are valued using broker reports that utilize quoted market prices for identical or comparable
instruments. Brokers gather observable inputs for all of the Company’s fixed income securities from a variety of
industry data providers and other third-party sources. The Company’s Level 2 long-term investments are valued
using broker reports that utilize a third-party professional pricing service that gathers information from multiple
market sources and integrates relevant credit information, observed market movements and sector news into their
pricing evaluation. The Company validates, on a sample basis, the derived prices provided by the brokers by
comparing their assessment of the fair values of the Level 2 long term investments against the fair values of the
portfolio balances of another third-party professional’s pricing services, other than that utilized by the brokers,
that use a similar technique as the brokers to derive pricing as described above. The Company’s foreign currency
derivative contracts are classified within Level 2 because the valuation inputs are based on quoted prices and
market observable data of similar instruments in active markets, such as currency spot and forward rates.
The Company did not have any transfers between Level 1 and Level 2 of the fair value hierarchy during
2013 and 2012.
ARS investments as of December 29, 2012 were classified within Level 3 because they were valued using a
discounted cash flow model. Some of the inputs to this model are unobservable in the market and are significant.
The roll-forward of the ARS measured at fair value on a recurring basis using significant unobservable
inputs (Level 3) is as follows:
December 28,
2013
December 29,
2012
(In millions)
Beginning balance ................................... $ 28 $ 38
Redemptions ....................................... (26) (6)
Losses included in net loss ............................. (2) —
Change in fair value included in net loss .................. — (4)
Ending balance ...................................... $— $ 28
The Company’s significant inputs and assumptions used in the discounted cash flow model to determine the
fair value of its ARS are listed below:
December 29,
2012
Discount rate for periodic interest payments ....................... 0.84%
Discount rate for principal repayments ........................... 1.31%
Liquidity discount ........................................... 0.90%
Credit discount .............................................. 2.00% to 12.00%
Estimated period ............................................ 17to20years
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