Western Digital 2002 Annual Report Download - page 41

WESTERN DIGITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Organization and Summary of SigniÑcant Accounting Policies
Western Digital Corporation (""Western Digital'' or the ""Company'') has prepared its consolidated Ñnancial
statements in accordance with accounting principles generally accepted in the United States and has adopted accounting
policies and practices which are generally accepted in the industry in which it operates. Following are the Company's
signiÑcant accounting policies:
Fiscal Year
The Company has a 52 or 53-week Ñscal year. In order to align its manufacturing and Ñnancial calendars, eÅective
during the three months ended December 31, 1999, the Company changed its Ñscal calendar so that each Ñscal month
ends on the Friday nearest to the last day of the calendar month. Prior to this change, the Company's Ñscal month ended
on the Saturday nearest to the last day of the calendar month. The change did not have a material impact on the
Company's results of operations or Ñnancial position. The 2002, 2001 and 2000 Ñscal years ended on June 28, June 29,
and June 30 respectively, and consisted of 52 weeks each. All general references to years relate to Ñscal years unless
otherwise noted.
Basis of Presentation
The consolidated Ñnancial statements include the accounts of the Company and its majority owned subsidiaries. All
signiÑcant intercompany accounts and transactions have been eliminated in consolidation. The accounts of foreign
subsidiaries have been remeasured using the U.S. dollar as the functional currency. As such, foreign exchange gains or
losses resulting from remeasurement of these accounts are reÖected in the results of operations. These foreign exchange
gains and losses were immaterial to the consolidated Ñnancial statements. Monetary and nonmonetary asset and liability
accounts have been remeasured using the exchange rate in eÅect at each year end and using historical rates, respectively.
Income statement accounts have been remeasured using average monthly exchange rates.
Cash Equivalents
The Company's cash equivalents represent highly liquid investments, primarily money market funds and
commercial paper, with original maturities of three months or less.
Concentration of Credit Risk
The Company designs, develops, manufactures and markets hard drives to personal computer manufacturers,
resellers and retailers throughout the world. The Company performs ongoing credit evaluations of its customers' Ñnancial
condition and generally requires no collateral. The Company maintains reserves for potential credit losses, and such losses
have historically been within management's expectations. The Company also has cash equivalent policies that limit the
amount of credit exposure to any one Ñnancial institution or investment instrument, and require that investments be
made only with Ñnancial institutions or in investment instruments evaluated as highly credit-worthy.
Inventory Valuation
Inventories are valued at the lower of cost or net realizable value. Cost is on a Ñrst-in, Ñrst-out basis for raw materials
and is computed on a currently adjusted standard basis (which approximates Ñrst-in, Ñrst-out) for work in process and
Ñnished goods.
Property and Equipment
The cost of property and equipment is depreciated over the estimated useful lives of the respective assets. The
majority of the Company's property and equipment is being depreciated over three years. Depreciation is computed on a
straight-line basis. Leasehold improvements are amortized over the lesser of the estimated useful lives of the assets or the
related lease terms.
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