SanDisk 2007 Annual Report Download - page 107

Download and view the complete annual report

Please find page 107 of the 2007 SanDisk annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 157

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152
  • 153
  • 154
  • 155
  • 156
  • 157

the business or prospects, or changes in market conditions, could result in an impairment charge and such a charge
could have a material adverse effect on the Company’s consolidated results of operations.
Fair Value of Financial Instruments. For certain of the Company’s financial instruments, including accounts
receivable, short-term investments and accounts payable, the carrying amounts approximate fair market value due
to their short maturities. For those financial instruments where the carrying amounts differ from fair market value,
the following table represents the related cost basis and the estimated fair values, which are based on quoted market
prices (in millions):
Carrying
Value
Estimated Fair
Value
Carrying
Value
Estimated Fair
Value
As of December 30, 2007 As of December 31, 2006
1% Convertible senior notes due 2013 ....... $1,150 $913 $1,150 $995
1% Convertible notes due 2035 ............ 75 85 75 98
Restricted long-term securities ............. — — 10 15
Advertising Expenses. Marketing co-op development programs, where the Company receives, or will
receive, an identifiable benefit (goods or services) in exchange for the amount paid to its customer and the
Company can reasonably estimate the fair value of the benefit it receives for the customer incentive payment, are
classified, when granted, as marketing expense. Advertising expenses not meeting this criteria are classified as a
reduction to product revenue. Any other advertising expenses not meeting these conditions are expensed as
incurred. Advertising expenses were $35.5 million, $24.8 million and $15.2 million in fiscal years 2007, 2006 and
2005, respectively.
Research and Development Expenses. Research and development expenditures are expensed as incurred.
Note 2: Recent Accounting Pronouncements
SFAS No. 160. In December 2007, the FASB issued Statement of Financial Accounting Standards No. 160
(“SFAS 160”), Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51. The
standard changes the accounting for noncontrolling (minority) interests in consolidated financial statements
including the requirements to classify noncontrolling interests as a component of consolidated stockholders’
equity, to identify earnings attributable to noncontrolling interests reported as part of consolidated earnings, and to
measure gain or loss on the deconsolidated subsidiary based upon the fair value of the noncontrolling equity
investment. Additionally, SFAS 160 revises the accounting for both increases and decreases in a parent’s controlling
ownership interest. SFAS 160 is effective for fiscal years beginning after December 15, 2008, with early adoption
prohibited. The Company is assessing the impact of SFAS 160 to its consolidated results of operations and financial
position.
SFAS No. 141 (revised). In December 2007, the FASB issued Statement of Financial Accounting Standards
No. 141 (revised) (“SFAS 141(R)”), Business Combinations. The standard changes the accounting for business
combinations by requiring that an acquiring entity measure and recognize identifiable assets acquired and liabilities
assumed at the acquisition date fair value with limited exceptions. The changes include the treatment of acquisition-
related transaction costs, the valuation of any noncontrolling interest at acquisition date fair value, the recording of
acquired contingent liabilities at acquisition date fair value and the subsequent re-measurement of such liabilities
after the acquisition date, the recognition of capitalized in-process research and development, the accounting for
acquisition-related restructuring cost accruals subsequent to the acquisition date, and the recognition of changes in
the acquirer’s income tax valuation allowance. SFAS 141(R) is effective for fiscal years beginning after Decem-
ber 15, 2008, with early adoption prohibited. The accounting treatment related to pre-acquisition uncertain tax
positions will change when SFAS 141(R) becomes effective, which will be in the first quarter of the Company’s
fiscal year 2009. At such time, any changes to the recognition or measurement of uncertain tax positions related to
pre-acquisition periods will be recorded through income tax expense, whereas currently the accounting treatment
would require any adjustment to be recognized through the purchase price. The Company expects SFAS 141(R) will
have an impact on its consolidated financial statements when effective, but the nature and magnitude of the specific
F-11
Notes to Consolidated Financial Statements — (Continued)