Crucial 2013 Annual Report Download - page 61

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Functional Currency: The U.S. dollar is the functional currency for all of our consolidated operations.
Financial Instruments: Cash equivalents include highly liquid short-term investments with original maturities to us of
three months or less, readily convertible to known amounts of cash. Investments with original maturities greater than three
months and remaining maturities less than one year are included in short-term investments. Investments with remaining
maturities greater than one year are included in long-term marketable investments. The carrying value of investment securities
sold is determined using the specific identification method.
Derivative and Hedging Instruments: We use derivative financial instruments to manage certain exposures to fluctuating
currency exchange and interest rates. Our derivatives consist primarily of forward and option currency contracts and interest
rate swap contracts. We do not use derivative instruments for trading or speculative purposes. Derivative instruments are
measured at their fair values and recognized as either assets or liabilities. The accounting for changes in the fair value of
derivative instruments is based on the intended use of the derivative and the resulting designation. For derivative instruments
that are not designated as hedges for accounting purpose, gains or losses from changes in fair values are recognized in other
non-operating income (expense). For derivative instruments designated as cash-flow hedges, the effective portion of the gain
or loss is included as a component of other comprehensive income (loss), and the ineffective or excluded portion of the gain or
loss is included in other non-operating income (expense). The amounts in accumulated other comprehensive income (loss) for
these cash flow hedges are reclassified into earnings in the same line items of the consolidated statements of operation and in
the same periods in which the underlying transactions affect earnings. Effectiveness is measured by comparing the cumulative
change in the fair value of the hedge contract with the cumulative change in the forecasted cash flows of the hedged item. For
the effectiveness assessment of our cash-flow hedges, changes in the time value are excluded for forward contracts and
included for options.
We seek to enter into master netting arrangements to mitigate credit risk in derivative transactions. These master netting
arrangements allow us and our counterparties to net settle amounts owed to each other. Derivative assets and liabilities that can
be net settled under these arrangements have been presented in our consolidated balance sheet on a net basis.
(See "Derivative Financial Instruments – Currency Derivatives with Hedge Accounting Designation" note.)
Inventories: Inventories are stated at the lower of average cost or market value. Cost includes labor, material and
overhead costs, including product and process technology costs. Determining market values of inventories involves numerous
judgments, including projecting average selling prices and sales volumes for future periods and costs to complete products in
work in process inventories. When market values are below costs, we record a charge to cost of goods sold to write down
inventories to their estimated market value in advance of when the inventories are actually sold. The major characteristics
considered in determining inventory categories for purposes of determining the lower of cost or market value are product type
and markets. Prior to the third quarter of 2013, inventory was categorized as memory (primarily DRAM and NAND Flash and
NOR Flash) and imaging products for purposes of determining lower of average cost or market. Due to the sale on May 3,
2013 of Micron Technology Italia, S.r.l. ("MIT") and our assignment to LFoundry Marsica S.r.l. ("LFoundry") of our supply
agreement with Aptina Imaging Corporation ("Aptina") for CMOS image sensors, we ceased manufacturing CMOS image
sensors subsequent to that date and no longer have imagining inventory for purposes of determining lower of average cost or
market.
Product and Process Technology: Costs incurred to acquire product and process technology or to patent technology are
capitalized and amortized on a straight-line basis over periods ranging up to 10 years. We capitalize a portion of costs incurred
based on the historical and projected patents issued as a percent of patents we file. Capitalized product and process technology
costs are amortized over the shorter of (i) the estimated useful life of the technology, (ii) the patent term or (iii) the term of the
technology agreement. Fully-amortized assets are removed from product and process technology and accumulated
amortization.
Property, Plant and Equipment: Property, plant and equipment are stated at cost and depreciated using the straight-line
method over estimated useful lives of generally 10 to 30 years for buildings, generally 5 to 7 years for equipment and 3 to 5
years for software. Assets held for sale are carried at the lower of cost or estimated fair value and are included in other
noncurrent assets. When property or equipment is retired or otherwise disposed, the net book value of the asset is removed and
we recognize any gain or loss in our results of operations.
We capitalize interest on borrowings during the active construction period of capital projects. Capitalized interest is added
to the cost of the underlying assets and amortized over the useful lives of the assets.