Western Digital 2008 Annual Report Download - page 59

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WESTERN DIGITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Organization and Summary of Significant Accounting Policies
Western Digital Corporation (the “Company” or “Western Digital” or “WD”) designs, develops, manufactures and
sells hard drives. A hard drive is a device that stores data on one or more rotating magnetic disks to allow fast access to
data. The Company’s hard drives are used in desktop computers, notebook computers, external storage devices, enterprise
applications such as servers, workstations, network attached storage and storage area networks and in consumer
electronics products such as personal/digital video recorders and satellite and cable set-top boxes. The Company sells its
products worldwide to original equipment manufacturers and original design manufacturers for inclusion in computer
systems or subsystems, and to distributors, resellers and retailers.
Western Digital has prepared its consolidated financial statements in accordance with accounting principles
generally accepted in the United States (“GAAP”) and has adopted accounting policies and practices which are generally
accepted in the industry in which it operates. The Company’s significant accounting policies are summarized below.
Fiscal Year
The Company has a 52 or 53-week fiscal year. The 2008, 2007 and 2006 fiscal years, which ended on June 27, 2008,
June 29, 2007 and June 30, 2006, respectively, consisted of 52 weeks each.
Basis of Presentation
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All
significant 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, gains or losses resulting from
remeasurement of these accounts from local currencies into U.S. dollars are reflected in the results of operations. These
gains and losses were immaterial to the consolidated financial statements.
On September 5, 2007, the Company completed its acquisition (the “Acquisition”) of Komag, Incorporated
(“Komag”). The Acquisition is further described in Note 11 below. In connection with the Acquisition, Komag became
an indirect wholly-owned subsidiary of the Company and changed its name to WD Media, Inc. (“WD Media”). WD
Media’s results of operations since the date of the Acquisition are included in the consolidated financial statements. The
consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, including
WD Media. All significant inter-company accounts and transactions have been eliminated in consolidation.
Cash and Cash Equivalents
The Company’s cash and cash equivalents represent highly liquid investments, primarily money market funds and
commercial paper, with original maturities of three months or less.
Investments
The Company’s investments consist primarily of auction-rate securities, which are investments in bonds with
original maturities greater than 90 days. The Company has classified these investments as “available for sale” securities
under Statement of Financial Accounting Standards (“SFAS”) No. 115 “Accounting for Certain Investments in Debt and
Equity Securities” and are carried at fair value.
Fair Value of Financial Instruments
The carrying amounts of cash and cash equivalents, accounts receivable, investments, accounts payable and accrued
expenses approximate fair value for all periods presented because of the short-term maturity of these assets and liabilities
or by using appropriate market information. The carrying amount of debt approximates fair value because of its variable
interest rate.
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