Intel 2006 Annual Report Download - page 65

Table of Contents
INTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Debt Instrument Investments
Debt instruments with original maturities at the date of purchase greater than approximately three months and remaining
maturities less than one year are classified as short-term investments. Debt instruments with remaining maturities greater than
one year are classified as other long-term investments.
Available
-for-Sale Investments
Investments designated as available-for-sale are reported at fair value, with unrealized gains and losses, net of tax, recorded in
accumulated other comprehensive income (loss). The cost of securities sold is based on the specific identification method. The
company’s available-for-sale investments include:
Non
-Marketable Investments
Non
-
marketable equity securities are accounted for at historical cost or, if Intel has the ability to exercise significant influence,
but not control, over the investee, using the equity method of accounting. Intel’
s proportionate share of investee income or loss
are accounted for under the equity method. Other equity method adjustments, as well as gains or losses on the sale or exchange
of these investments, are recorded in interest and other, net. Gains or losses on the sale or exchange of non-marketable equity
securities, which are not subject to the equity method of accounting, are recorded in gains (losses) on equity securities, net.
Non
-marketable equity securities are included in other long-term assets. Certain other non-marketable investments, such as
cost basis loan participation notes, are accounted for at amortized cost and are classified as short-term investments and other
long-term investments.
Other-Than-Temporary Impairment
All of the company’s available-for-sale investments, non-marketable equity securities, and other investments are subject to a
periodic impairment review. Investments are considered to be impaired when a decline in fair value is judged to be
other-than-temporary, for the following investments:
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•
Marketable debt securities
when the interest rate and foreign currency risks are not hedged at inception of the
investment. These debt securities are held to generate a return commensurate with three-month LIBOR. The interest
income and realized gains and losses on the sale of these securities are recorded in interest and other, net.
•
Marketable equity securities
when the investments are considered strategic in nature at the time of original
classification. The company acquires these equity investments for the promotion of business and strategic objectives.
To the extent that these investments continue to have strategic value, the company typically does not attempt to reduce
or eliminate the inherent equity market risks through hedging activities. The realized gains or losses on the sale or
exchange of marketable equity securities are recorded in gains (losses) on equity securities, net.
•
Marketable equity securities
when the resulting fair value is significantly below cost basis and/or has lasted for an
extended period of time. The evaluation that Intel uses to determine whether a marketable equity security is impaired is
based on the specific facts and circumstances present at the time of assessment, which include the consideration of
general market conditions, the duration and extent to which the fair value is less than cost, and the company’s intent
and ability to hold the investment for a sufficient period of time to allow for recovery in value. The company also
considers specific adverse conditions related to the financial health of and business outlook for the investee, including
industry and sector performance, changes in technology, operational and financing cash flow factors, and changes in
the investee
’
s credit rating.
•
Non
-marketable investments when events or circumstances are identified that would likely have a significant adverse
effect on the fair value of the investment. The indicators that Intel uses to identify those events and circumstances
include (a) the investee’s revenue and earning trends relative to predefined milestones and overall business prospects;
(b) the technological feasibility of the investee’s products and technologies; (c) the general market conditions in the
investee’s industry or geographic area, including adverse regulatory or economic changes; (d) factors related to the
investee’s ability to remain in business, such as the investee’
s liquidity, debt ratios, and the rate at which the investee is
using its cash; and (e) the investee’s receipt of additional funding at a lower valuation. If an investee obtains additional
funding at a valuation lower than Intel’s carrying amount or a new round of equity funding is required to stay in
operation, and the new round of equity does not appear imminent, it is presumed that the investment is other than
temporarily impaired, unless specific facts and circumstances indicate otherwise.