SanDisk 2009 Annual Report Download - page 120

Notes to Consolidated Financial Statements
Note 1: Organization and Summary of Significant Accounting Policies
Organization and Nature of Operations. SanDisk Corporation (together with its subsidiaries, the
“Company”) was incorporated in Delaware on June 1, 1988. The Company designs, develops, markets and
manufactures flash storage card products used in a wide variety of consumer electronics products. The Company
operates in one segment, flash memory storage products.
Basis of Presentation. The Company’s fiscal year ends on the Sunday closest to December 31. Fiscal year
2009 consisted of 53 weeks, with the additional week included in the fourth quarter. Fiscal years 2008 and 2007
each consisted of 52 weeks. Certain prior period amounts in the footnotes have been reclassified to conform to
the current period presentation. The Company has evaluated, recorded and disclosed material subsequent events
in the Notes to the Consolidated Financial Statements, if any, that have occurred up to the date of the filing of
this annual report on Form 10-K on February 25, 2010. For accounting and disclosure purposes, the exchange
rate at January 3, 2010 of 92.46 was used to convert Japanese yen to U.S. dollar. Throughout the Notes to
Consolidated Financial Statements, unless otherwise indicated, the reference to Net Income (Loss) refers to Net
Income (Loss) Attributable to Common Stockholders.
Principles of Consolidation. The Consolidated Financial Statements include the accounts of the Company
and its majority-owned subsidiaries. All intercompany balances and transactions have been eliminated.
Non-controlling interest represents the minority shareholders’ proportionate share of the net assets and results of
operations of the Company’s majority-owned subsidiaries. The Consolidated Financial Statements also include
the results of companies acquired by the Company from the date of each acquisition.
Use of Estimates.The preparation of financial statements in conformity with generally accepted accounting
principles in the United States (“U.S. GAAP”) requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes. The estimates and judgments
affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent
liabilities. On an ongoing basis, the Company evaluates its estimates, including those related to customer
programs and incentives, product returns, bad debts, inventories, investments, long-lived assets, income taxes,
warranty obligations, restructuring, contingencies, share-based compensation and litigation. The Company bases
its estimates on historical experience and on other assumptions that its management believes are reasonable
under the circumstances. These estimates form the basis for making judgments about the carrying values of
assets and liabilities when those values are not readily apparent from other sources. Actual results could differ
materially from these estimates.
Revenue Recognition, Sales Returns and Allowances and Sales Incentive Programs. The Company
recognizes revenues when the earnings process is complete, as evidenced by an agreement with the customer,
transfer of title and acceptance, if applicable, fixed or determinable pricing and reasonable assurance of
realization. Revenue is generally recognized at the time of shipment for customers not eligible for price
protection and/or a right of return. Sales made to distributors and retailers are generally under agreements
allowing price protection and/or a right of return and, therefore, the revenues and related costs of these
transactions are deferred until the retailers or distributors sell-through the merchandise to their end customer, or
the rights of return expire. Estimated sales returns are provided for as a reduction to product revenue and were
not material for any period presented in the accompanying Consolidated Financial Statements. The cost of
shipping products to customers is included in cost of product revenues. The Company recognizes expenses
related to sales commissions in the period in which they are earned.
Revenue from patent licensing arrangements is recognized when earned, estimable and realizable. The
timing of revenue recognition is dependent on the terms of each license agreement and on the timing of sales of
licensed products. The Company generally recognizes royalty revenue when it is reported to the Company by its
F-8