Qualcomm 2004 Annual Report Download - page 68

QUALCOMM 64
Notes to Consolidated Financial Statements continued
The reclassification adjustment for other-than-temporary losses on marketable securities results from the recognition of unrealized losses in
the statement of operations due to declines in the market prices of those securities deemed to be other than temporary. The reclassification
adjustment for net realized gains results from the recognition of the net realized gains in the statement of operations when the marketable
securities are sold.
Components of accumulated other comprehensive income (loss) consisted of the following (in millions):
September 30,
2004 2003
Foreign currency translation $(27) $(83)
Unrealized gains on marketable securities, net of income taxes 42 59
$ 15 $(24)
Stock Split
On July 13, 2004, the Company announced a two-for-one stock split in the form of a stock dividend. Stock was distributed on August 13, 2004
to stockholders of record as of July 23, 2004. Stockholders’ equity has been restated to give retroactive recognition to the stock split for all periods
presented by reclassifying the par value of the additional shares arising from the split from paid-in-capital to common stock. All references in
the financial statements and notes to number of shares and per share amounts reflect the stock split.
Earnings Per Common Share
Basic earnings per common share is computed by dividing net income by the weighted average number of common shares outstanding during
the reporting period. Diluted earnings per common share is computed by dividing net income by the combination of dilutive common share
equivalents, comprised of shares issuable under the Company’s stock-based compensation plans and shares subject to written put options,
and the weighted average number of common shares outstanding during the reporting period. The incremental dilutive common share equiva-
lents, calculated using the treasurystock method, for fiscal 2004, 2003 and 2002 wereapproximately 58,686,000, 56,338,000 and
76,883,000, respectively.
Employee stock options to purchase approximately 40,221,000, 86,540,000 and 81,690,000 shares of common stock during fiscal 2004, 2003
and 2002, respectively, were outstanding but not included in the computation of diluted earnings per common share because the option exercise
price was greater than the average market price of the common stock, and therefore, the effect on dilutive earnings per common sharewould
have been anti-dilutive. Put options outstanding during fiscal 2004 to purchase 3,000,000 shares of common stock were not included in the
earnings per common share computation for fiscal 2004 because the put options’ exercise prices were less than the average market price of the
common stock while they wereoutstanding, and therefore, the effect on diluted earnings per common share would be anti-dilutive (Note 7).
Future Accounting Requirements
In June 2004, the FASB issued EITF Issue No. 02-14, “Whether an Investor Should Apply the Equity Method of Accounting to Investments
Other Than Common Stock.” EITF Issue No. 02-14 addresses whether the equity method of accounting applies when an investor does not have
an investment in voting common stock of an investee but exercises significant influence through other means. EITF Issue No. 02-14 states that
an investor should only apply the equity method of accounting when it has investments in either common stock or in-substance common stock
of a corporation, provided that the investor has the ability to exercise significant influence over the operating and financial policies of the investee.
The accounting provisions of EITF Issue No. 02-14 are effective for the first quarter of fiscal 2005. The Company is in the process of determining
the effect, if any, the adoption of EITF Issue No. 02-14 will have on its financial statements.
In March 2004, the FASB issued EITF Issue No. 03-1, “The Meaning of Other-Than-Temporary Impairment and Its Application to Certain
Investments” which provides new guidance for assessing impairment losses on debt and equity investments. Additionally,EITF Issue No. 03-1
includes new disclosure requirements for investments that are deemed to be temporarily impaired. In September 2004, the FASB delayed the
accounting provisions of EITF Issue No. 03-1; however, the disclosure requirements remain effective and have been adopted for the Company’s
year ended September 30, 2004. The Company will evaluate the effect, if any, of EITF Issue No. 03-1 when final guidance is released.