SanDisk 2010 Annual Report Download - page 196

Notes To Consolidated Financial Statements
Cash Equivalents, Short and Long-Term Marketable Securities. Cash equivalents consist of short-term,
highly liquid financial instruments with insignificant interest rate risk that are readily convertible to cash and
have maturities of three months or less from the date of purchase. Marketable securities with original maturities
greater than three months and remaining maturities less than one year are classified as short-term marketable
securities. Marketable securities with remaining maturities greater than one year as of the balance sheet date are
classified as long-term marketable securities. Short and long-term fixed income investments consist of
commercial paper, U.S. treasuries, government agency and government-sponsored agency obligations, corporate/
municipal notes and bonds, and variable rate demand notes. Both short and long-term marketable securities also
include investments in certain equity securities. The fair market value of cash equivalents, and short and long-
term marketable securities at January 2, 2011 approximated their carrying value. Cost of securities sold is based
on specific identification.
In determining if and when a decline in market value below cost of these investments is other-than-
temporary, the Company evaluates both quantitative and qualitative information including the market conditions,
offering prices, trends of earnings, price multiples and other key measures. For equity securities, when such a
decline in value is deemed to be other-than-temporary, the Company recognizes an impairment loss in the current
period operating results to the extent of the decline. For debt securities, only the decline attributable to
deteriorating credit of an other-than-temporary impairment is taken to the Consolidated Statement of Operations,
unless the Company intends, or more likely than not will be forced, to sell the security.
Property and Equipment. Property and equipment are carried at cost less accumulated depreciation and
amortization. Depreciation and amortization are computed using the straight-line method over the estimated
useful lives of the assets, ranging from two to twenty-five years, or the remaining lease term, whichever is
shorter.
Variable Interest Entities. The Company evaluates its equity method investments to determine whether any
investee is a variable interest entity (“VIE”). If the Company concludes that an investee is a variable interest
entity, the Company evaluates its expected gains and losses from such investee to determine whether the
Company is the primary beneficiary of the investee. If the Company is the primary beneficiary of a variable
interest entity, the Company consolidates such entity and reflects the non-controlling interest of other
beneficiaries of that entity. If the Company concludes that an investee is not a variable interest entity, the
Company does not consolidate the investee.
Equity Investments. The Company accounts for investments in equity securities of other entities, including
VIEs that are not consolidated, under the cost method of accounting if investments in voting equity interests of
the investee are less than 20%. The equity method of accounting is used if the Company’s investment in voting
stock is greater than or equal to 20% but less than a majority. In considering the accounting method for
investments less than 20%, the Company also considers other factors such as its ability to exercise significant
influence over operating and financial policies of the investee. If certain factors are present, the Company could
account for investments for which it has less than a 20% ownership under the equity method of accounting.
Investments in public companies with restrictions of less than one year are classified as available-for-sale
and are adjusted to their fair market value with unrealized gains and losses recorded as a component of
accumulated other comprehensive income. Investments in public companies with restrictions greater than one
year are carried at cost. Investments in public and non-public companies are reviewed on a quarterly basis to
determine if their value has been impaired and adjustments are recorded as necessary. Upon disposition of these
investments, the specific identification method is used to determine the cost basis in computing realized gains or
losses. Declines in value that are judged to be other-than-temporary are reported in Other income (expense) or
Cost of product revenues in the accompanying Consolidated Statements of Operations.
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