Qualcomm 2014 Annual Report Download - page 84

QUALCOMM Incorporated
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company recorded $26 million , $2 million and $62 million related to four in-process research and development (IPR&D) projects
during fiscal 2014 , one IPR&D project in fiscal 2013 and 10 IPR&D projects in fiscal 2012 , respectively. During fiscal 2014, the Company
recorded $20 million in impairment charges related to two IPR&D projects acquired in fiscal 2012. At September 28, 2014 , remaining IPR&D
of $55 million consisted of eight projects, which are expected to be completed within three years. Upon completion, the IPR&D projects will be
amortized over their useful lives, which are expected to range from three to nine years.
Note 10. Deconsolidation of and Retained Investment in the BWA Subsidiaries
In fiscal 2010, the Company established subsidiaries in India to operate a wireless network using Broadband Wireless Access (BWA)
spectrum (the BWA subsidiaries). In June 2012, Bharti Airtel Limited (Bharti), an Indian wireless network operator, purchased shares in the
BWA subsidiaries that were held by two third-party Indian investors, and the BWA subsidiaries issued additional equity interests to Bharti for
$85 million , reducing the Company’s ownership interest in each of the BWA subsidiaries to 51% . On June 25, 2013, the BWA subsidiaries
issued additional equity interests to Bharti for $11 million , further reducing the Company’s ownership interests to 49%
, and redeemed all of the
outstanding debentures using funding provided by Bharti through subordinated debt (Note 7). Also, Bharti gained additional power over
significant activities through certain leadership changes. These events resulted in a change in control of the BWA subsidiaries and therefore, the
BWA subsidiaries were deconsolidated from the Company’s financial statements. Prior to the deconsolidation, the assets and liabilities of the
BWA subsidiaries were classified as held for sale.
As a result of the deconsolidation, the Company recognized a gain in net investment income of $6 million measured as the difference
between (a) the net fair values of the retained noncontrolling investment and the Company’s guarantee of the former BWA subsidiaries’ bank
loans (Note 7) and (b) the carrying values of the former BWA subsidiaries’
net assets, including cumulative translation losses and noncontrolling
interests. Total assets and total liabilities were reduced by $1.0 billion and $999 million , respectively. Such assets and liabilities consisted
primarily of wireless spectrum, network-related assets and loan obligations. The deconsolidation of these amounts represented a noncash
investing and noncash financing transaction and was not reflected in the statement of cash flows for fiscal 2013. The fair value of the Company’
s
retained noncontrolling investment of $34 million was determined by applying a discounted cash flow valuation model to the estimated cash
proceeds that the Company expected to receive upon the sale of its interest to Bharti.
The former BWA subsidiaries were merged into one entity on August 5, 2013. On August 30, 2013, the remaining former BWA subsidiary
repaid all of the outstanding loans, excluding the DoT loan, using funding provided by Bharti in the form of subordinated debt (Note 7). Also on
August 30, 2013, Bharti converted the subordinated debt, and the former BWA subsidiary issued additional equity interests to Bharti, further
reducing the Company’s ownership interest to 7% . On October 15, 2013, the DoT loan was repaid using funding provided by Bharti (Note 7),
and on October 17, 2013, Bharti acquired all of the Company’s interest in the remaining former subsidiary.
Note 11. Discontinued Operations
On November 25, 2013 , the Company completed its sale of the North and Latin America operations of its Omnitracs division to a U.S.-
based private equity firm for cash consideration of $788 million (net of cash sold). As a result, the Company recorded a gain in discontinued
operations of $665 million ( $430 million net of income tax expense) during fiscal 2014. Total assets and total liabilities were reduced by $150
million and $45 million , respectively. The revenues and operating results of the North and Latin America operations of the Omnitracs division,
which comprised substantially all of the Omnitracs division, were not presented as discontinued operations in any fiscal period because they
were immaterial. The related assets (included in other current assets and other noncurrent assets) and liabilities (included in other current
liabilities and other noncurrent liabilities) of $139 million and $43 million , respectively, were classified as held for sale at September 29, 2013.
On March 27, 2011, the FLO TV business and network were shut down. On December 27, 2011 , the Company completed the sale of
substantially all of its 700 MHz spectrum for $1.9 billion , and as a result, the Company recognized a gain in discontinued operations of $1.2
billion during fiscal 2012 . Accordingly, the results of operations of the FLO TV business were presented as discontinued operations. Income
(loss) from discontinued operations included share-based compensation and excluded certain general corporate expenses allocated to the FLO
TV business during the periods presented. Discontinued operations in fiscal 2012 were $1.2 billion ( $776 million net of income tax expense).
Note 12. Fair Value Measurements
The following table presents the Company’s fair value hierarchy for assets and liabilities measured at fair value on a recurring basis at
September 28, 2014 (in millions):
F- 28