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

Annual report pursuant to Section 13 and 15(d)

Financial Instruments

Financial Instruments

12 Months Ended

Dec. 25, 2021

Investments, Debt and Equity Securities [Abstract]

Fair Value Measurements

The Company’s financial instruments are measured and recorded at fair value on a recurring basis, except for non-marketable equity investments in privately-held companies. These equity investments are generally accounted for under the measurement alternative, defined as cost, less impairments, adjusted for subsequent observable price changes and are periodically assessed for impairment when events or circumstances indicate that a decline in value may have occurred.

Fair Value Hierarchy

The fair value framework requires the categorization of assets and liabilities into three levels based upon the assumptions (inputs) used to price the assets or liabilities. The guidance for fair value measurements requires that assets and liabilities carried at fair value be classified and disclosed in one of the following categories:

Level 1 — Quoted (unadjusted) prices in active markets for identical assets or liabilities.

Level 2 — Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liability.

Level 3 — Unobservable inputs to the valuation methodology that are supported by little or no market activity and that are significant to the measurement of the fair value of the assets or liabilities. Level 3 assets and liabilities include those whose fair value measurements are determined using pricing models, discounted cash flow methodologies or similar valuation techniques, as well as significant management judgment or estimation.

Financial Instruments Recorded at Fair Value on a Recurring Basis


	December 25, 2021						December 26, 2020
(In millions)	Level 1		Level 2		Total		Level 1		Level 2		Total
Cash equivalents
Money market funds	$	4	$	—	$	4	$	1	$	—	$	1
Commercial paper	—		45		45		—		—		—
Short-term investments
Commercial paper	—		880		880		—		295		295
Time deposits	—		193		193		—		400		400
Other non-current assets
Equity investments	66		—		66		—		—		—
Deferred compensation plan investments	72		—		72		46		—		46
Total assets measured at fair value	$	142	$	1,118	$	1,260	$	47	$	695	$	742

The Company did not have any financial instruments measured at fair value on a recurring basis within Level 3 fair value measurements as of December 25, 2021 or December 26, 2020.

During the year ended December 25, 2021, the Company recognized a $64 million gain recorded in Other income in the consolidated statements of operations due to an increase in the fair value of an equity investment.

Deferred compensation plan investments are mutual fund investments held in a Rabbi trust established to maintain the Company’s executive deferred compensation plan.

Financial Instruments Not Recorded at Fair Value

The Company carries its financial instruments at fair value with the exception of its long-term debt. The carrying amounts and estimated fair values of the Company’s long-term debt are as follows:


	December 25, 2021				December 26, 2020
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
	(In millions)

Current portion of long-term debt, net	$	312	$	326	$	—	$	—
Long-term debt, net of current portion	1		15		330		642

The estimated fair value of the Company’s long-term debt are based on Level 2 inputs as the fair value is based on quoted prices for the Company’s debt and comparable instruments in inactive markets. The Company’s 2.125% Notes, included in Long-term debt, net, above, were convertible at the option of the holder as of December 25, 2021. The estimated fair value of the 2.125% Notes as of December 25, 2021 takes into account the value of the Company’s stock price of $146.14 as of December 23, 2021, the last trading date for the year ended December 25, 2021 and the initial conversion price of approximately $8.00 per share of common stock.

The fair value of the Company’s time deposits, accounts receivable, accounts payable and other short-term obligations approximate their carrying value based on existing terms.

Hedging Transactions and Derivative Financial Instruments

Foreign Currency Forward Contracts Designated as Accounting Hedges

The Company enters into foreign currency forward contracts to hedge its exposure to foreign currency exchange rate risk related to future forecasted transactions denominated in currencies other than the U.S. Dollar. These contracts generally mature within 18 months and are designated as accounting hedges. As of December 25, 2021 and December 26, 2020, the notional values of the Company’s outstanding foreign currency forward contracts designated as cash flow hedges were $894 million and $501 million, respectively. The fair value of these contracts was not material as of December 25, 2021 and December 26, 2020.

Foreign Currency Forward Contracts Not Designated as Accounting Hedges

The Company also enters into foreign currency forward contracts to reduce the short-term effects of foreign currency fluctuations on certain receivables or payables denominated in currencies other than the U.S. Dollar. These forward contracts generally mature within 3 months and are not designated as accounting hedges. As of December 25, 2021 and December 26, 2020, the notional values of outstanding contracts were $291 million and $254 million, respectively. The fair value of these contracts was not material as of December 25, 2021 and December 26, 2020.