Western Digital 2000 Annual Report Download - page 27

capital position is dependent upon a number of factors that are discussed below under the heading ""Risk
factors relating to Western Digital particularly.''
New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board (""FASB'') issued Statement of Financial
Accounting Standards No. 133, ""Accounting for Derivative Instruments and Hedging Activities'' (""SFAS
133''). SFAS 133 was eÅective for all Ñscal quarters for Ñscal years beginning after June 15, 1999. In August
1999, the FASB issued Statement of Financial Accounting Standards No. 137, ""Accounting for Derivative
Instruments and Hedging Activities Ì Deferral of the EÅective Date of FASB Statement No. 133, an
amendment of FASB Statement No. 133'' (""SFAS 137''), which defers the eÅective date of SFAS 133 to all
Ñscal quarters for Ñscal years beginning after June 15, 2000. In June 2000, the FASB issued Statement of
Financial Accounting Standards No. 138, ""Accounting for Certain Derivative Instruments and Certain
Hedging Activities, an Amendment of FASB Statement No. 133''. SFAS 133, as amended, establishes
accounting and reporting standards for derivative instruments embedded in other contracts and for hedging
activities. The application of these statements is not expected to have a material impact on the Company's
consolidated Ñnancial position, results of operations or liquidity, and the Company does not anticipate
recording a signiÑcant adjustment as a result of the transition to these statements.
In December 1999, the Securities and Exchange Commission (""SEC'') issued StaÅ Accounting
Bulletin 101 (""SAB101'') ""Revenue Recognition in Financial Statements''. This StaÅ Accounting Bulletin
summarizes certain of the staÅ's views in applying generally accepted accounting principles to revenue
recognition in Ñnancial statements. The Company will be required to follow the guidance in SAB101 no later
than its fourth quarter of 2001, with restatement of earlier quarters in 2001 required, if necessary. The SEC
has recently indicated it intends to issue further guidance with respect to adoption of speciÑc issues addressed
by SAB101. Until such time as this additional guidance is issued, the Company is unable to assess the impact,
if any, SAB101 may have on its consolidated Ñnancial position or results of operations.
In March 2000, the FASB issued Interpretation No. 44 ""Accounting for Certain Transactions Involving
Stock Compensation Ì an interpretation of APB Opinion No. 25'' (""FIN 44''). This Interpretation clariÑes
the deÑnition of an employee for purposes of applying Accounting Principles Board Opinion No. 25,
""Accounting for Stock Issued to Employees'' (""APB 25''), the criteria for determining whether a plan
qualiÑes as a noncompensatory plan, the accounting consequence of various modiÑcations to the terms of a
previously Ñxed stock option or award, and the accounting for an exchange of stock compensation awards in a
business combination. This Interpretation is eÅective July 1, 2000, but certain conclusions in this Interpreta-
tion cover speciÑc events that occur after either December 15, 1998 or January 12, 2000. The adoption of
FIN 44 is not expected to have a material impact on the Company's consolidated Ñnancial position, results of
operations or liquidity.
Year 2000
On January 1, 2000, the Company incurred nominal impact on its products, equipment, computer
systems and applications as a result of the Year 2000 issue. The Company attributes this to its Year 2000
readiness eÅorts. As of December 31, 1999, systems remediation and integration testing and development of
the Company's contingency plans had been completed. Supplier management is an ongoing process, and no
material impact was felt from lack of supplier readiness at January 1, 2000. Although the Company did not
experience any material problems related to the Year 2000 issue, there can be no assurances that problems
relating to the Year 2000 issue will not manifest themselves in the future. Expenditures related to the Year
2000 project, excluding normal replacement of existing capital assets, totaled approximately $12.2 million.
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