Qualcomm 2012 Annual Report Download - page 62

QUALCOMM Incorporated
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. The Company and Its Significant Accounting Policies
The Company. QUALCOMM Incorporated, a Delaware corporation, and its subsidiaries (collectively the Company or Qualcomm), develop,
design, manufacture and market digital telecommunications products and services. The Company is a leading developer and supplier of
integrated circuits and system software based on Code Division Multiple Access (CDMA), Orthogonal Frequency Division Multiple Access
(OFDMA) and other technologies for use in voice and data communications, networking, application processing, multimedia and global
positioning system products to device and infrastructure manufacturers. The Company grants licenses to use portions of its intellectual property
portfolio, which includes certain patent rights essential to and/or useful in the manufacture and sale of certain wireless products, and receives
fixed license fees (payable in one or more installments) as well as ongoing royalties based on sales by licensees of wireless telecommunications
equipment products incorporating its patented technologies. The Company sells equipment, software and services to transportation and other
companies to wirelessly connect their assets and workforce. The Company provides software products and services for content enablement
across a wide variety of platforms and devices for the wireless industry. The Company also makes strategic investments to support the global
adoption of its technologies and services.
Principles of Consolidation. The Company’s consolidated financial statements include the assets, liabilities and operating results of majority-
owned subsidiaries. In addition, the Company consolidates its investments in certain immaterial less than majority-owned variable interest
entities as the Company is the primary beneficiary. The ownership of the other interest holders of consolidated subsidiaries and the variable
interest entities is presented separately in the consolidated balance sheets and statements of operations. All significant intercompany accounts
and transactions have been eliminated. Certain of the Company’s consolidated subsidiaries are included in the consolidated financial statements
one month in arrears to facilitate the timely inclusion of such entities in the Company’s consolidated financial statements.
Financial Statement Preparation. The preparation of financial statements in conformity with accounting principles generally accepted in the
United States requires management to make estimates and assumptions that affect the reported amounts and the disclosure of contingent amounts
in the Company’s consolidated financial statements and the accompanying notes. Actual results could differ from those estimates. Certain prior
year amounts have been reclassified to conform to the current year presentation.
Fiscal Year. The Company operates and reports using a 52-53 week fiscal year ending on the last Sunday in September. The fiscal year
ended September 30, 2012 included 53 weeks . The fiscal years ended September 25, 2011 and September 26, 2010 included 52 weeks .
Cash Equivalents. The Company considers all highly liquid investments with original maturities of three months or less to be cash
equivalents. Cash equivalents are comprised of money market funds, commercial paper, government agencies’ securities and certain time
deposits. The carrying amounts approximate fair value due to the short maturities of these instruments.
Marketable Securities. The appropriate classification of marketable securities is determined at the time of purchase and reevaluated at each
balance sheet date. Marketable securities include trading securities, available-for-sale securities, securities for which the Company has elected
the fair value option and certain time deposits. The Company classifies portfolios of debt securities that utilize derivative instruments to acquire
or reduce foreign exchange and/or equity, prepayment and credit risk as trading. The Company classifies marketable securities as current or
noncurrent based on the nature of the securities and their availability for use in current operations. Marketable securities are stated at fair value.
The net unrealized gains or losses on available-for-sale securities are recorded as a component of accumulated other comprehensive income
(loss), net of income tax. The unrealized gains or losses on trading securities and securities for which the Company has elected the fair value
option are recognized in net investment income. The realized gains and losses on marketable securities are determined using the specific
identification method.
At each balance sheet date, the Company assesses available-for-sale securities in an unrealized loss position to determine whether the
unrealized loss is other than temporary. The Company considers factors including: the significance of the decline in value compared to the cost
basis; underlying factors contributing to a decline in the prices of securities in a single asset class; how long the market value of the security has
been less than its cost basis; the security’s relative performance versus its peers, sector or asset class; expected market volatility, the market and
economy in general; analyst recommendations and price targets; views of external investment managers; news or financial information that has
been released specific to the investee; and the outlook for the overall industry in which the investee operates.
If the debt security’s market value is below amortized cost and the Company either intends to sell the
security or it is more likely than not that
the Company will be required to sell the security before its anticipated recovery, the Company records an other-than-temporary impairment
charge to net investment income for the entire amount of the impairment. For the remaining debt securities, if an other-than-temporary
impairment exists, the Company separates the other-than-temporary impairment into
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