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NOTE 6: Goodwill and Acquired Intangible Assets
Goodwill
The carrying amounts of goodwill as of December 26, 2015 and December 27, 2014 were as follows:
Computing and
Graphics
Enterprise,
Embedded and
Semi-Custom All Other Total
(In millions)
Initial goodwill due to ATI acquisition ................ $1,194 $255 $ 745 $ 2,194
Initial goodwill due to SeaMicro acquisition ........... 165 65 — 230
1,359 320 745 2,424
Accumulated impairment losses ..................... (1,126) — (745) (1,871)
Balance as of December 28, 2013 .................... 233 320 — 553
Impairment charges ............................... (233) — — (233)
Balance as of December 27, 2014 .................... — 320 — 320
Assets held-for-sale ............................... — (42) — (42)
Balance as of December 26, 2015 .................... — 278 — 278
Accumulated impairment losses ..................... $(1,359) $— $(745) $(2,104)
As a result of the decision to form the JVs with Nantong Fujitsu Microelectronics Co., Ltd., the balance
sheet as of December 26, 2015 reflects held-for-sale accounting of the ATMP assets and liabilities which
requires reclassification of such financial amounts to current assets and current liabilities. Asset balances
reclassified into other current assets included goodwill of $42 million.
In the third quarter of 2014, the Company’s realignment of its organizational structure, effective July 1,
2014, caused a change in the composition of the Company’s reportable segments and reporting units. This
represented a change in circumstance requiring the reassignment of the goodwill to the new reporting units using
a relative fair value approach and an interim goodwill impairment analysis before and after the Company’s
reorganization. The Company completed this goodwill impairment analysis during the third quarter of 2014. For
purposes of this analysis, the Company’s estimates of fair value were based on the income approach, which
estimates the fair value of the Company’s reporting units based on future discounted cash flows. The Company
determined that each reporting unit’s estimated fair value exceeded its carrying value, indicating that there was
no goodwill impairment.
During the fourth quarter of 2014, the Company conducted its annual impairment test of goodwill. In step
one of the impairment test, the Company compared the fair value of each of the reporting units to its carrying
value. The Company determined that the carrying value of the Computing and Graphics reporting unit exceeded
its fair value, indicating potential goodwill impairment existed based on a combination of factors such as a
decline in stock price. Therefore, the Company performed the second step of the impairment test, in which the
fair value of the reporting unit is allocated to all of the assets and liabilities of the reporting unit on a fair value
basis, including any unrecognized intangible assets, with any excess representing the implied fair value of
goodwill. The fair value was determined using an income approach, which estimates the present value of future
cash flows based on management’s forecast of revenue growth rates and operating margins. Based on this
analysis, the implied fair value of the goodwill of the Computing and Graphics reporting unit was zero. The
Company concluded that the carrying amount of goodwill assigned to the Computing and Graphics segment
exceeded the implied fair values and recorded an impairment charge of $233 million, which is included in
“Goodwill impairment charge” on the Company’s consolidated statement of operations.
The Company determined that the estimated fair value exceeded the carrying value of the remaining two
reporting units, indicating that there was no goodwill impairment with respect to these reporting units. In
connection with completing the goodwill impairment analysis, the Company reviewed its long-lived tangible and
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