Intel 2007 Annual Report Download - page 68

Table of Contents
INTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Under the modified prospective method of adoption for SFAS No. 123(R), the compensation cost that we recognized
beginning in 2006 includes (a) compensation cost for all equity incentive awards granted prior to but not yet vested as of
January 1, 2006, based on the grant-date fair value estimated in accordance with the original provisions of SFAS No. 123, and
(b) compensation cost for all equity incentive awards granted subsequent to January 1, 2006, based on the grant-
date fair value
estimated in accordance with the provisions of SFAS No. 123(R). We use the straight-line attribution method to recognize
share-based compensation over the service period of the award. Upon exercise, cancellation, forfeiture, or expiration of stock
options, or upon vesting or forfeiture of restricted stock units, we eliminate deferred tax assets for options and restricted stock
units with multiple vesting dates for each vesting period on a first-in, first-out basis as if each vesting period were a separate
award. To calculate the excess tax benefits available as of the date of adoption for use in offsetting future tax shortfalls, we
followed the alternative transition method discussed in Financial Accounting Standards Board (FASB) Staff Position No. 123
(R)-3.
Recent Accounting Pronouncements
In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (SFAS No. 157). SFAS No. 157 defines fair
value, establishes a framework for measuring fair value, and enhances fair value measurement disclosure. In February 2008,
the FASB issued FASB Staff Position (FSP) 157-1, “Application of FASB Statement No. 157 to FASB Statement No. 13 and
Other Accounting Pronouncements That Address Fair Value Measurements for Purposes of Lease Classification or
Measurement under Statement 13” (FSP 157-1) and FSP 157-2, “Effective Date of FASB Statement No. 157”
(FSP 157-2). FSP 157-1 amends SFAS No. 157 to remove certain leasing transactions from its scope. FSP 157-2 delays the
effective date of SFAS No. 157 for all non-financial assets and non-financial liabilities, except for items that are recognized or
disclosed at fair value in the financial statements on a recurring basis (at least annually), until the beginning of the first quarter
of fiscal 2009. The measurement and disclosure requirements related to financial assets and financial liabilities are effective
for us beginning in the first quarter of fiscal 2008. The adoption of SFAS No. 157 for financial assets and financial liabilities
will not have a significant impact on our consolidated financial statements. However, the resulting fair values calculated under
SFAS No. 157 after adoption may be different from the fair values that would have been calculated under previous guidance.
We are currently evaluating the impact that SFAS No. 157 will have on our consolidated financial statements when it is
applied to non-financial assets and non-financial liabilities beginning in the first quarter of 2009.
In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial
Liabilities” (SFAS No. 159). SFAS No. 159 permits companies to choose to measure certain financial instruments and other
items at fair value. The standard requires that unrealized gains and losses are reported in earnings for items measured using the
fair value option. SFAS No. 159 is effective for us beginning in the first quarter of fiscal year 2008. The adoption of
SFAS No. 159 is not expected to have a significant impact on our consolidated financial statements.
In June 2007, the FASB ratified EITF Issue No. 07-3, “Accounting for Nonrefundable Advance Payments for Goods or
Services to Be Used in Future Research and Development Activities” (EITF 07-3). EITF 07-3 requires non-refundable
advance payments for goods and services to be used in future research and development (R&D) activities to be recorded as
assets and the payments to be expensed when the R&D activities are performed. EITF 07-3 applies prospectively for new
contractual arrangements entered into beginning in the first quarter of fiscal year 2008. Prior to adoption, we recognized these
non-refundable advance payments as an expense upon payment. The adoption of EITF 07-3 is not expected to have a
significant impact on our consolidated financial statements.
In December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations” (SFAS No. 141(R)). Under
SFAS No. 141(R), an entity is required to recognize the assets acquired, liabilities assumed, contractual contingencies, and
contingent consideration at their fair value on the acquisition date. It further requires that acquisition-related costs be
recognized separately from the acquisition and expensed as incurred, restructuring costs generally be expensed in periods
subsequent to the acquisition date, and changes in accounting for deferred tax asset valuation allowances and acquired income
tax uncertainties after the measurement period impact income tax expense. In addition, acquired in-process research and
development (IPR&D) is capitalized as an intangible asset and amortized over its estimated useful life. The adoption of
SFAS No. 141(R) will change our accounting treatment for business combinations on a prospective basis beginning in the first
quarter of fiscal year 2009.
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