Crucial 2012 Annual Report Download - page 54

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Recently Adopted Accounting Standards
In June 2011, the Financial Accounting Standards Board ("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. We adopted this standard in the fourth quarter of 2012. The adoption of this standard did
not have a material impact on our financial statements.
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 adopted this standard in the third quarter of 2012. The adoption of this
standard did not have a material impact on our financial statements.
Elpida Memory, Inc.
Elpida Sponsor Agreement
On July 2, 2012, we entered into a sponsor agreement (the "Sponsor Agreement") with the trustees of Elpida Memory, Inc.
("Elpida") and its subsidiary, Akita Elpida Memory, Inc. ("Akita" and, together with Elpida, the "Elpida Companies"). The
Elpida Companies filed petitions for corporate reorganization proceedings with the Tokyo District Court under the Corporate
Reorganization Act of Japan on February 27, 2012.
Under the Sponsor Agreement, we committed to support plans of reorganization for the Elpida Companies that would
provide for payments to the secured and unsecured creditors of the Elpida Companies in an aggregate amount of 200 billion
yen (or approximately $2.5 billion), less certain expenses of the reorganization proceedings and certain other items. As a
condition of the Sponsor Agreement, we deposited 1.8 billion yen (or approximately $23 million) into an escrow account in
July 2012 which will be applied to the share acquisition payments at closing. Of the aggregate amount, we will fund 60 billion
yen (or approximately $750 million) through a cash payment to Elpida at the closing, in exchange for 100% ownership of
Elpida's equity. The remaining 140 billion yen (or approximately $1.75 billion) of payments will be made by the Elpida
Companies in six annual installments payable at the end of each calendar year beginning in 2014, with payments of 20 billion
yen (or approximately $250 million) in each of 2014 through 2017, and payments of 30 billion yen (or approximately $375
million) in each of 2018 and 2019.
We have agreed to provide additional support to Elpida, which may include a payment guarantee under certain
circumstances, to facilitate its continued access to debtor-in-possession financing of up to 16 billion yen (or approximately
$200 million) from third-party finance sources through the closing of the Elpida share purchase, and to use reasonable efforts to
assist Elpida in obtaining up to 5 billion yen (or approximately $63 million) of continued debtor-in-possession financing from
third parties for up to two months following the closing. In addition, we have agreed to use reasonable efforts to assist the
Elpida Companies in financing up to 64 billion yen (or approximately $800 million) of capital expenditures through June 30,
2014, including up to 40 billion yen (or approximately $500 million) prior to June 30, 2013, either by providing payment
guarantees under certain circumstances, or by providing such financing directly.
Under applicable Japanese law, following the closing of the transaction, because a portion of the payments to creditors will
be satisfied through the installment payments described above, the operation of the businesses of the Elpida Companies will
remain subject to the oversight of the court in charge of the reorganization proceedings and of the trustees (including a trustee
nominated by us upon the closing of the transaction).
The Sponsor Agreement contains certain termination rights, including our right to terminate the Sponsor Agreement if a
change, taken together with all other changes, occurs that is or would reasonably be expected to be materially adverse to (i) the
business, assets, etc. of Elpida and its subsidiaries, taken as a whole, or to the business, assets, etc. taken as a whole of Rexchip
Electronics Corporation ("Rexchip"), a Taiwanese corporation formed as a manufacturing joint venture by Elpida and
Powerchip Technology Corporation ("Powerchip"), a Taiwanese corporation; or (ii) our ability to operate Elpida's business
immediately following closing in substantially the same manner as conducted by Elpida as of July 2, 2012. Elpida currently
owns, directly and indirectly through a subsidiary, approximately 65% of Rexchip's outstanding common stock.