Advanced Micro Devices, Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Goodwill and Acquired Intangible Assets

Goodwill and Acquired Intangible Assets

12 Months Ended

Dec. 27, 2014

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Acquired Intangible Assets

Goodwill

The carrying amounts of goodwill as of December 27, 2014 and December 28, 2013 were as follows:



	Computing and Graphics			Enterprise, Embedded and Semi-Custom		All Other			Total
	(In millions)
Initial goodwill due to ATI acquisition	$	1,194		$	255	$	745		$	2,194
Initial goodwill due to SeaMicro acquisition	165			65		—			230
	1,359			320		745			2,424
Accumulated impairment losses	(1,126		)	—		(745		)	(1,871		)
Balance as of December 29, 2012	233			320		—			553
Impairment charges	—			—		—			—
Balance as of December 28, 2013	233			320		—			553
Impairment charges	(233		)	—		—			(233		)
Balance as of December 27, 2014	—			320		—			320
Accumulated impairment losses	$	(1,359	)	$	—	$	(745	)	$	(2,104	)

In the third quarter of 2014, the Company’s realignment of its organizational structure, effective July 1, 2014, caused a change in the composition of the Company’s reportable segments and reporting units. This represented a change in circumstance requiring the reassignment of the goodwill to the new reporting units using a relative fair value approach and an interim goodwill impairment analysis before and after the Company’s reorganization. The Company completed this goodwill impairment analysis during the third quarter of 2014. For purposes of this analysis, the Company’s estimates of fair value were based on the income approach, which estimates the fair value of the Company’s reporting units based on future discounted cash flows. The Company determined that each reporting unit's estimated fair value exceeded its carrying value, indicating that there was no goodwill impairment.

During the fourth quarter of 2014, the Company conducted its annual impairment test of goodwill. In step one of the impairment test, the Company compared the fair value of each of the reporting units to its carrying value. The Company determined that the carrying value of the Computing and Graphics reporting unit exceeded its fair value, indicating potential goodwill impairment existed based on a combination of factors such as a decline in stock price. Therefore, the Company performed the second step of the impairment test, in which the fair value of the reporting unit is allocated to all of the assets and liabilities of the reporting unit on a fair value basis, including any unrecognized intangible assets, with any excess representing the implied fair value of goodwill. The fair value was determined using an income approach, which estimates the present value of future cash flows based on management’s forecast of revenue growth rates and operating margins. Based on this analysis, the implied fair value of the goodwill of the Computing and Graphics reporting unit was zero. The Company concluded that the carrying amount of goodwill assigned to the Computing and Graphics segment exceeded the implied fair values and recorded an impairment charge of $233 million, which is included in “Goodwill impairment charge” on the Company’s consolidated statement of operations.

The Company determined that the estimated fair value exceeded the carrying value of the remaining two reporting units, indicating that there was no goodwill impairment with respect to these reporting units. In connection with completing the goodwill impairment analysis, the Company reviewed its long-lived tangible and intangible assets within the Computing and Graphics reporting unit under ASC 360, “Accounting for the Impairment or Disposal of Long-Lived Assets.” The Company determined that the forecasted undiscounted cash flows related to these assets or asset groups were in excess of their carrying values, and therefore these assets were not impaired.

In the fourth quarters of 2013 and 2012, the Company conducted its annual impairment tests of goodwill. Based on the results of the Company’s analysis of goodwill, each reporting unit’s fair value exceeded its carrying value, indicating that there was no goodwill impairment in 2013 or 2012.

Acquisition-related intangible assets

The balances of acquisition-related intangible assets as of December 27, 2014 and December 28, 2013 were as follows:



	December 27, 2014								December 28, 2013
	Gross		Accumulated Amortization			Net		Weighted-average amortization period	Gross		Accumulated Amortization			Net
	(In millions, except years)
Developed technology	$	258	$	(201	)	$	57	5.15 years	$	258	$	(189	)	$	69
In-process research and development	6		—			6		N/A	6		—			6
Customer relationships	168		(167		)	1		1.25 years	168		(166		)	2
Trademark and trade name	37		(36		)	1		1.25 years	37		(36		)	1
Total	$	469	$	(404	)	$	65	4.56 years	$	469	$	(391	)	$	78

The following table summarizes amortization expense associated with acquisition-related intangible assets:



	2014		2013		2012
	(In millions)
Developed technology	$	13	$	13	$	9
Customer relationships	1		1		1
Trademark and trade name	—		4		4
Total	$	14	$	18	$	14

As of December 27, 2014, the Company's future amortization expenses related to acquisition-related intangible assets were as follows:



Year	(In millions)
2015	$	13
2016	11
2017	11
2018	11
2019	11
2020 and thereafter	2
Total intangible assets subject to amortization	59
In-process research and development	6
Total intangible assets, net	$	65

- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

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