Crucial 2011 Annual Report Download - page 53

Recently Issued Accounting Standards
In May 2011, the FASB issued a new accounting standard on fair value measurements that clarifies the application of existing guidance and
disclosure requirements, changes certain fair value measurement principles and requires additional disclosures about fair value measurements. We
are required to adopt this standard in the third quarter of 2012. We do not expect this adoption to have a material impact on our financial
statements.
In June 2011, the FASB issued a new accounting standard on the presentation of comprehensive income. The new standard requires the
presentation of comprehensive income, the components of net income and the components of other comprehensive income either in a single
continuous statement of comprehensive income or in two separate but consecutive statements. The new standard also requires presentation of
adjustments for items that are reclassified from other comprehensive income to net income in the statement where the components of net income
and the components of other comprehensive income are presented. We are required to adopt this standard as of the beginning of 2013. The
adoption of this standard will only impact the presentation of our financial statements.
Variable Interest Entities
We have interests in joint venture entities that are VIEs. If we are the primary beneficiary of the VIE, we are required to consolidate it. To
determine if we are the primary beneficiary, we evaluate whether we have the power to direct the activities that most significantly impact the
VIE's economic performance and the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to
the VIE. Our evaluation includes identification of significant activities and an assessment of our ability to direct those activities based on
governance provisions and arrangements to provide or receive product and process technology, product supply, operations services, equity
funding, financing and other applicable agreements and circumstances. Our assessments of whether we are the primary beneficiary of our VIEs
require significant assumptions and judgment. For further information regarding our VIEs that we account for under the equity method, see
"Equity Method Investments" note. For further information regarding our consolidated VIEs, see "Consolidated Variable Interest Entities" note.
Unconsolidated Variable Interest Entities
Inotera and MeiYa – Inotera Memories, Inc. ("Inotera") and MeiYa Technology Corporation ("MeiYa") are VIEs because of the terms of
their supply agreements with us and our partner, Nanya Technology Corporation ("Nanya"). We have determined that we do not have power to
direct the activities of Inotera and MeiYa that most significantly impact their economic performance, primarily due to (1) limitations on our
governance rights that require the consent of other parties for key operating decisions and (2) our dependence on our joint venture partner for
financing and the ability to operate in Taiwan. Therefore, we account for our interests in these entities under the equity method.
Transform – Transform Solar Pty Ltd. ("Transform") is a VIE because its equity is not sufficient to permit Transform to finance its activities
without additional subordinated financial support from us and our partner, Origin Energy Limited ("Origin"). We have determined that we do not
have power to direct the activities of Transform that most significantly impacts its economic performance, primarily due to limitations on our
governance rights that require the consent of Origin for key operating decisions. Therefore, we account for our interest in Transform under the
equity method.
Consolidated Variable Interest Entities
IMFT and IMFS – IM Flash Technologies, LLC ("IMFT") and IM Flash Singapore LLP ("IMFS") are both VIEs because all of their costs
are passed to us and our partner, Intel Corporation ("Intel"), through product purchase agreements and they are dependent upon us and Intel for
any additional cash requirements. For both IM Flash entities (i.e., IMFT and IMFS), we determined that we have the power to direct the activities
of the entities that most significantly impact their economic performance. The primary activities of the IM Flash entities are driven by the
constant introduction of product and process technology. Because we perform a significant majority of the technology development, we have the
power to direct key activities of the entities. In addition, IMFT manufactures certain products exclusively for us using our technology. As a result
of our 86% ownership interest in IMFS as of September 1, 2011, we have significantly greater economic exposure than Intel. We also determined
that we have the obligation to absorb losses and the right to receive benefits from the IM Flash entities that could potentially be significant to these
entities. Therefore, we consolidate the IM Flash entities.
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