Adaptec 2006 Annual Report Download - page 69

Table of Contents
NOTE 1. Summary of Significant Accounting Policies
Description of business. PMC-Sierra, Inc (the “Company” or “PMC”) designs, develops, markets and supports high-speed broadband communications
semiconductors, storage semiconductors and microprocessors for metro, access, Fiber To The Home, wireless infrastructure, storage, laser printers and customer
premise equipment. The Company offers worldwide technical and sales support through a network of offices in North America, Europe and Asia.
Basis of presentation. The accompanying Consolidated Financial Statements have been prepared pursuant to the rules and regulations of the United States
Securities and Exchange Commission (“SEC”) and United States Generally Accepted Accounting Principles. Fiscal 2006 consisted of 52 weeks and ended on
Sunday, December 31. Fiscal 2005 consisted of 53 weeks and ended on Saturday, December 31. Fiscal 2004 consisted of 52 weeks and ended on Sunday,
December 26. The Company’s reporting currency is the United States dollar. The accompanying Consolidated Financial Statements include the accounts of
PMC-Sierra, Inc. and any of its subsidiaries or investees in which PMC exercises control. As at December 31, 2006 and 2005, all subsidiaries included in these
Consolidated Financial Statements were wholly owned by PMC. All inter-company accounts and transactions have been eliminated.
Estimates. The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States
requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Estimates are used
for, but not limited to, stock-based compensation, purchase accounting assumptions including those used to calculate the fair value of intangible assets and
goodwill, the accounting for doubtful accounts, inventory reserves, depreciation and amortization, asset impairments, sales returns, warranty costs, income taxes,
restructuring costs, and contingencies. Actual results could differ from these estimates.
Cash and cash equivalents. At December 31, 2006, Cash and cash equivalents included $0.8 million (December 31, 2005 - $0.8 million) pledged with a bank as
collateral for letters of credit issued as security for leased facilities. Cash equivalents are defined as highly liquid debt instruments with maturities at the date of
purchase of 90 days or less. Short-term investments are defined as money market instruments or bonds and notes with original maturities greater than 90 days,
but less than one year. Investments in bonds and notes are defined as bonds and notes with original or remaining maturities greater than 365 days. Any
investments in bonds and notes maturing within one year of the balance sheet date are reclassified to and reported as short-term investments.
Under Statement of Financial Accounting Standards No. 115, “Accounting for Certain Investments in Debt and Equity Securities”, management classifies
investments as available-for-sale or held-to-maturity at the time of purchase and re-evaluates such designation as of each balance sheet date. Investments
classified as held-to-maturity securities are stated at amortized cost with corresponding premiums or discounts amortized against interest income over the life of
the investment. Marketable equity and debt securities not classified as held-to-maturity are classified as available-for-sale and reported at fair value. The cost of
securities sold is based on the specific identification method. Unrealized gains and losses on these investments, net of any related tax effect are included in equity
as a separate component of stockholders’ equity.
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Source: PMC SIERRA INC, 10-K, March 01, 2007 Powered by Morningstar® Document Research℠