Qualcomm 2014 Annual Report Download - page 63

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, have manufactured on its behalf and market digital communications products and services. The Company is a
leading developer and supplier of integrated circuits and system software based on CDMA (Code Division Multiple Access), OFDMA
(Orthogonal Frequency Division Multiple Access) 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 provides software services for
content and push-to-talk enablement across a wide variety of platforms and devices for the wireless industry and sells products designed for the
implementation of small cells. 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 investment in an immaterial less than majority-owned variable interest
entity as the Company is the primary beneficiary. The ownership of the other interest holders of consolidated subsidiaries and the variable
interest entity is presented separately in the consolidated balance sheets and statements of operations. All significant intercompany accounts and
transactions have been eliminated.
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. Examples of the Company’s significant accounting
estimates that may involve a higher degree of judgment and complexity than others include: the valuation and assessment of the recoverability of
goodwill, other indefinite-lived assets and long-lived assets; the valuation of marketable securities and the determination of other-than-
temporary
impairments; the calculation of tax liabilities, including the recognition and measurement of uncertain tax positions, and the determination that
the operating earnings of certain non-United States subsidiaries are indefinitely reinvested outside the United States; and the recognition and
measurement of loss contingencies related to legal proceedings. 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 years
ended September 28, 2014 and September 29, 2013 included 52 weeks . The fiscal year ended September 30, 2012 included 53 weeks .
Cash Equivalents. The Company considers all highly liquid investments with original maturities of 90 days or less to be cash equivalents.
Cash equivalents are comprised of money market funds, certificates of deposit, commercial paper, government agencies’ securities, certain bank
time deposits and repurchase agreements fully collateralized by government agencies’ securities. The carrying amounts approximate fair value
due to the short maturities of these instruments.
Marketable Securities. Marketable securities include trading securities, available-for-sale securities and securities for which the Company
has elected the fair value option. The classification of marketable securities within these categories is determined at the time of purchase and
reevaluated at each balance sheet date. 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, net
of income taxes. 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 as 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.
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