SanDisk 2008 Annual Report Download - page 47

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Accordingly, we expect that as we reduce the price of our flash devices, consumers will demand an increasing
number of gigabytes and/or units of memory and that over time, new markets will emerge. In order to profitably
capitalize on price elasticity of demand in the market for flash storage products, we must reduce our cost per
gigabyte at a rate similar to the change in selling price per gigabyte, and the average capacity of our products
must grow enough to offset price declines. We seek to achieve these cost reductions through technology
improvements, primarily by increasing the amount of memory stored in a given area of silicon.
We adopted Statement of Financial Accounting Standards No. 157, or SFAS 157, Fair Value
Measurements, as of the beginning of fiscal year 2008. In February 2008, the Financial Accounting Standards
Board, or FASB, issued FASB Staff Position No. FAS 157-2, Effective Date of FASB Statement No. 157, which
provides a one year deferral of the effective date of SFAS 157 for non-financial assets and non-financial
liabilities, except those that are recognized or disclosed in the financial statements at fair value at least annually.
Therefore, we have only adopted the provisions of SFAS 157 with respect to our financial assets and liabilities.
SFAS 157 defines fair value, establishes a framework for measuring fair value under generally accepted
accounting principles and enhances disclosures about fair value measurements. Fair value is defined under SFAS
157 as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the
principal or most advantageous market for the asset or liability in an orderly transaction between market
participants on the measurement date. Valuation techniques used to measure fair value under SFAS 157 must
maximize the use of observable inputs and minimize the use of unobservable inputs. The adoption of this
statement did not have a material impact on our consolidated results of operations and financial condition. See
Note 3, “Investments and Fair Value Measurements,” of the Notes to Consolidated Financial Statements of this
Form 10-K included in Item 8 of this report.
We adopted Statement of Financial Accounting Standards No. 159, or SFAS 159, Establishing the Fair
Value Option for Financial Assets and Liabilities, which permits entities to elect, at specified election dates, to
measure eligible financial instruments at fair value. As of December 28, 2008, we did not elect the fair value
option for any financial assets and liabilities that were not previously measured at fair value. See Note 3,
“Investments and Fair Value Measurements,” of the Notes to Consolidated Financial Statements of this Form
10-K included in Item 8 of this report.
The provision for income taxes for the year ended December 28, 2008, has been corrected to $153.7 million
from $166.8 million as reported in our Form 8-K filed with the Securities and Exchange Commission on
February 2, 2009. This correction has correspondingly reduced our net loss and net loss per share for fiscal year
2008 and adjusted net assets at December 28, 2008.
Critical Accounting Policies & Estimates
Our discussion and analysis of our financial condition and results of operations is based upon our
Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally
accepted in the United States, or U.S. GAAP.
Use of Estimates. The preparation of these financial statements requires us to make estimates and judgments
that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent
liabilities. On an ongoing basis, we evaluate our estimates, including, among others, those related to customer
programs and incentives, product returns, bad debts, inventories and related reserves, investments, long-lived
assets, income taxes, warranty obligations, restructuring, contingencies, share-based compensation, and
litigation. We base our estimates on historical experience and on other assumptions that we believe are
reasonable under the circumstances, the results of which form the basis for our judgments about the carrying
values of assets and liabilities when those values are not readily apparent from other sources. Estimates have
historically approximated actual results. However, future results will differ from these estimates under different
assumptions and conditions.
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