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Table of Contents
Notes to Consolidated Financial Statements — (Continued)
as incurred. Prepaid advertising expenses were approximately $0.4 million and $0.9 million at January 2, 2005 and December 28,
2003, respectively. Advertising expenses were $20.4 million, $5.0 million and $3.4 million, in 2004, 2003 and 2002 respectively.
Research and Development Expenses. Research and development expenditures are expensed as incurred.
Recently Issued Accounting Standards. The FASB adopted a revised Statement of Financial Accounting Standards No. 123, Share
Based Payments, with an effective date of June 15, 2005. The Company expects to adopt SFAS 123R in its third quarter of 2005, a
transition period allowed under SFAS 123R, and the Company currently does not expect to restate prior periods to conform with the
new accounting standard. SFAS 123R will require the Company to recognize an expense based on the fair value of all share−based
payments to employees, including grants of options to buy shares of its common stock. The Company is unable to estimate the effect
of adopting SFAS 123R because the actual amount will be determined by reference to inputs to its option pricing model at the time of
future share based compensation awards. Adoption of SFAS 123R is expected to increase the Company’s operating expenses.
The FASB adopted Statement of Financial Accounting Standards No. 151, Inventory Costs, an Amendment to ARB No. 43, with an
effective date of June 15, 2005. SFAS 151 requires that abnormal amounts of idle facility expense, freight, handling costs, and
spoilage be recognized as current period charges and requires the allocation of fixed production overheads to inventory based on the
normal capacity of the applicable production facility. As permitted by SFAS 151, the Company will adopt SFAS 151 at the beginning
of 2005 and does not expect that its adoption will have a material adverse effect on its reported results of operations.
Note 2: Balance Sheet Information
Cash, Cash Equivalents and Short−Term Investments. The Company’s unrestricted investments at fair market value as of
January 2, 2005 and December 28, 2003 were as follows (in thousands): January 2, December 28,
2005 2003
Cash and cash equivalents:
Cash $ 10,788 $ 12,660
Money market funds 139,124 501,876
Commercial paper 81,000 157,979
Government agencies 232,883 61,964
Total cash and cash equivalents $ 463,795 $ 734,479
Short−term investments:
U.S. government agency obligations $ 345,465 $ 101,725
Municipal notes/ bonds 286,220 335,102
Corporate notes/ bonds 73,930 42,290
Auction rate preferred stock 153,560 49,000
Total short−term investments $ 859,175 $ 528,117
Investments in foundries:
Marketable equity securities(a) 20,398 36,976
Total investments in foundries $ 20,398 $ 36,976
Total cash, cash equivalents and short−term investments $ 1,343,368 $ 1,299,572
(a) Includes Investment in Foundries, short−term, which also includes a warrant to purchase ordinary shares of Tower
Semiconductor Ltd.(Tower), with an approximate fair value of $0.1 million as of January 2, 2005 and $1.2 million as of
December 28, 2003. F−12