Crucial 2013 Annual Report Download - page 62

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Variable Interest Entities
We have interests in entities that are Variable Interest Entities ("VIEs"). If we are the primary beneficiary of a 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 judgments.
Unconsolidated Variable Interest Entities
Inotera: Inotera Memories, Inc. ("Inotera") is a VIE because its equity is not sufficient to permit it to finance its activities
without additional support from its shareholders. In the second quarter of 2013, we entered into agreements with Nanya
Technology Corporation ("Nanya") and Inotera to amend the joint venture relationship involving Inotera, including a new
supply agreement between us and Inotera. We have determined that we do not have the power to direct the activities of Inotera
that most significantly impact its economic performance, primarily due to (1) limitations on our governance rights that require
the consent of other parties for key operating decisions and (2) Inotera's dependence on Nanya for financing and the ability of
Inotera to operate in Taiwan. Therefore, we do not consolidate Inotera and we account for our interest under the equity method.
Transform: Transform Solar Pty Ltd. ("Transform") is a VIE because its equity is not sufficient to permit it to finance its
activities without additional financial support from us or its parent, Origin Energy Limited ("Origin"). We have determined that
we do not have the power to direct the activities of Transform that most significantly impact its economic performance,
primarily due to limitations on our governance rights that require the consent of Origin for key operating decisions. Therefore,
we do not consolidate Transform and we account for our interest under the equity method. As of August 30, 2012, Transform's
operations were substantially discontinued.
For further information regarding our VIEs that we account for under the equity method, see "Equity Method Investments"
note.
EQUVO Entities: EQUVO HK Limited and EQUVA Capital 1 Pte. Ltd. (together, the "EQUVO Entities") are special
purpose entities created to facilitate equipment sale-leaseback financing transactions between us and a consortium of financial
institutions that fund the sale-leaseback transactions ("Financing Entities"). Neither we nor the Financing Entities have an
equity interest in the EQUVO Entities. The EQUVO Entities are VIEs because their equity is not sufficient to permit them to
finance their activities without additional support from the Financing Entities and because the third-party equity holder lacks
characteristics of a controlling financial interest. By design, the arrangements with the EQUVO Entities are merely financing
vehicles and we do not bear any significant risks from variable interests with the EQUVO Entities. Therefore, we have
determined that we do not have the power to direct the activities of the EQUVO Entities that most significantly impact their
economic performance and we do not consolidate the EQUVO Entities.
SC Hiroshima Energy Corporation: SC Hiroshima Energy Corporation ("SCHE") is an entity created to construct and
operate a cogeneration, electrical power plant to support our wafer manufacturing facility in Hiroshima, Japan. SCHE is a VIE
due to the nature of its tolling agreements with us and our purchase and call options for SCHE's assets. We do not have an
equity ownership interest in SCHE. We do not control the operation and maintenance of the plant, which we have determined
are the activities of SCHE that most significantly impacts its economic performance. Therefore, we do not consolidate SCHE.
Consolidated Variable Interest Entities
IMFT: IM Flash Technologies, LLC ("IMFT") is a VIE because all of its costs are passed to us and its other member, Intel
Corporation ("Intel"), through product purchase agreements and IMFT is dependent upon us or Intel for any additional cash
requirements. We determined that we have the power to direct the activities of IMFT that most significantly impact its
economic performance. The primary activities of IMFT 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 its key
activities. In addition, IMFT manufactures certain products exclusively for us using our technology. We also determined that
we have the obligation to absorb losses and the right to receive benefits from IMFT that could potentially be significant to
it. Therefore, we consolidate IMFT.