Intel 2004 Annual Report Download - page 54

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Table of Contents
INTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1: Basis of Presentation
Intel Corporation has a 52- or 53-week fiscal year that ends on the last Saturday in December. Fiscal year 2004, a 52-
week year, ended on
December 25, 2004. Fiscal year 2003 was a 52-week year that ended on December 27, and fiscal year 2002, also a 52-week year, ended on
December 28. The next 53-week year will end on December 31, 2005.
The consolidated financial statements include the accounts of Intel and its wholly owned subsidiaries. Intel is not involved with any
variable interest entities, as defined by the Financial Accounting Standards Board (FASB) Interpretation No. 46, having a significant effect on
the financial statements. Intercompany accounts and transactions have been eliminated. Partially owned, non-controlled equity affiliates are
accounted for under the equity method. Accounts denominated in non-United States currencies have been remeasured using the United States
(U.S.) dollar as the functional currency. Certain amounts reported in previous years have been reclassified to conform to the 2004 presentation.
During 2004, the company reclassified $445 million from deferred tax liabilities to common stock and capital stock in excess of par value (see
“Note 10: Provision for Taxes”). No amounts related to deferred tax liabilities were reclassified in the prior-period financial statements.
Note 2: Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. requires management to
make estimates and judgments that affect the amounts reported in the financial statements and accompanying notes. The accounting estimates
that require management’s most difficult and subjective judgments include the assessment of recoverability of property, plant, and equipment
and goodwill; the valuation of non-marketable equity securities and inventory; and the recognition and measurement of income tax assets and
liabilities. The actual results experienced by the company may differ from management’s estimates.
Cash and Cash Equivalents
Highly liquid debt securities with insignificant interest rate risk and with original maturities from the date of purchase of three months or
less are classified as cash and cash equivalents.
Investments
Trading Assets. Trading assets are stated at fair value, with gains or losses resulting from changes in fair value recognized currently in
earnings. The company may elect to classify a portion of its marketable debt securities as trading assets. For these debt instruments, gains or
losses from changes in fair value due to interest rate and currency market fluctuations, offset by losses or gains on related derivatives, are
included in interest and other, net. Also included in trading assets is a marketable equity portfolio held to generate returns that seek to offset
changes in liabilities related to the equity market risk of certain deferred compensation arrangements. Gains or losses from changes in fair value
of these equity securities, offset by losses or gains on the related liabilities, are included in interest and other, net. The company also uses fixed
income investments and derivative instruments to seek to offset the remaining portion of the changes in the compensation liabilities. In
addition, a portion of the company’s marketable equity securities may from time to time be classified as trading assets, if the company no
longer deems the investments to be strategic in nature at the time of trading asset designation, and has the ability and intent to mitigate equity
market risk through sale or the use of derivative instruments. For these marketable equity securities, gains or losses from changes in fair value,
primarily offset by losses or gains on related derivative instruments, are included in gains (losses) on equity securities, net.
Available-for-Sale Investments. Investments designated as available-for-sale include marketable debt and equity securities. Investments
that are designated as available-for-sale are reported at fair value, with unrealized gains and losses, net of tax, recorded in stockholders’ equity.
The cost of securities sold is based on the specific identification method. Realized gains and losses on the sale of debt securities are recorded in
interest and other, net. Realized gains or losses on the sale or exchange of equity securities and declines in value judged to be other than
temporary are recorded in gains (losses) on equity securities, net. Marketable equity securities are presumed to be impaired if the fair value is
less than the cost basis continuously for at least six months, absent evidence to the contrary.
Debt securities with original maturities greater than three months and remaining maturities less than one year are classified as short-term
investments. Debt securities with remaining maturities greater than one year are classified as long-term investments.
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