Crucial 2014 Annual Report Download - page 56

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Variable Interest Entities
We have interests in entities that are 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 is a VIE because its equity is not sufficient to permit it to finance its activities without additional support
from its shareholders. 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.
See "Equity Method Investments – Inotera" 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. 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 impact its economic performance. Therefore, we do not consolidate SCHE.
Consolidated Variable Interest Entities
IMFT: IMFT is a VIE because all of its costs are passed to us and its other member, Intel, through product purchase
agreements and IMFT is dependent upon us or Intel for any additional cash requirements. 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. As a result, we have determined that we have the power
to direct the activities of IMFT that most significantly impact its economic performance and, therefore, we consolidate IMFT.
IMFS: Prior to April 6, 2012, IMFS was a VIE because all of its costs were passed to us and its other member, Intel,
through product purchase agreements and IMFS was dependent upon us or Intel for any additional cash requirements. Prior to
April 6, 2012, we determined that we had the power to direct the activities of IMFS that most significantly impacted its
economic performance. Therefore, we consolidated IMFS. On April 6, 2012, we acquired Intel's remaining interests in IMFS
and it ceased to be a VIE.
MP Mask: MP Mask is a VIE because substantially all of its costs are passed to us and its other member, Photronics,
through product purchase agreements and MP Mask is dependent upon us or Photronics for any additional cash
requirements. We have tie-breaking voting rights over key operating decisions and nearly all key MP Mask activities are driven
by our supply needs. We also determined that we have the obligation to absorb losses and the right to receive benefits from MP
Mask that could potentially be significant to it. As a result, we have determined that we have the power to direct the activities
of MP Mask that most significantly impact its economic performance and, therefore, we consolidate MP Mask.