SanDisk 2012 Annual Report Download - page 173

This is a TAB type table. Insert
conts here. Annual Report
SANDISK CORPORATION
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 the State of 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 years
2012, 2011 and 2010 each consisted of 52 weeks. Certain prior period amounts have been reclassified within
Cash flows from operating activities in the Consolidated Statements of Cash Flows to conform to the current
period presentation. For accounting and disclosure purposes, the exchange rate at December 30, 2012, January 1,
2012 and January 2, 2011 of 85.99, 77.17 and 81.23, respectively, was used to convert Japanese yen to United
States (“U.S.”) dollars for each respective fiscal year-end. Throughout the Notes to Consolidated Financial
Statements, unless otherwise indicated, references to Net income refers to Net income 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 U.S. Generally Accepted
Accounting Principles (“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, expenses and related disclosure of contingent liabilities. On an
ongoing basis, the Company evaluates its estimates, including those related to customer programs and incentives,
intellectual property claims, product returns, allowance for doubtful accounts, inventories and inventory reserves,
valuation and impairments of marketable securities and investments, impairments of goodwill and long-lived
assets, income taxes, warranty obligations, restructurings, contingencies, share-based compensation and
litigation. The Company bases 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 value of assets and liabilities when those values are not readily apparent from other sources. Actual
results could materially differ 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, pricing is fixed or determinable and collectability is reasonably
assured. 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 their rights of return
expire. Estimated sales returns are provided for as a reduction to product revenues 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 the commissions are earned.
For multiple element arrangements and revenue arrangements that include software elements, the Company
allocates revenue to each element based on its relative selling price in accordance with the Company’s normal
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