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Table of Contents
INTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In the first quarter of 2008, we adopted new standards that permitted companies to choose to measure certain financial
instruments and other items at fair value using an instrument-by-instrument election. The new standards required unrealized
gains and losses to be reported in earnings for items measured using the fair value option. For further discussion, see “Note 5:
Fair Value.” These new standards also required cash flows from purchases, sales, and maturities of trading securities to be
classified based on the nature and purpose for which the securities were acquired. We assessed the nature and purpose of our
trading assets and determined that our marketable debt instruments will be classified on the statement of cash flows as
investing activities, as they are held with the purpose of generating returns. Activity related to equity securities offsetting
deferred compensation remained classified as operating activities, as they were maintained to offset changes in liabilities
related to the equity market risk of certain deferred compensation arrangements. These standards did not allow for
retrospective application to periods prior to 2008; therefore, all trading asset activity for prior periods will continue to be
presented as operating activities on the statement of cash flows.
In the first quarter of 2008, amended views of the U.S. Securities and Exchange Commission (SEC) on the use of the
simplified method in developing estimates of the expected lives of share options became effective for us. The amendment, in
part, allowed the continued use, subject to specific criteria, of the simplified method in estimating the expected lives of share
options granted after December 31, 2007. We will continue to use the simplified method until we have the historical data
necessary to provide reasonable estimates of expected lives.
2009
In the first quarter of 2009, we adopted new standards that changed the accounting for convertible debt instruments with cash
settlement features. As of adoption, these new standards applied to our junior subordinated convertible debentures issued in
2005 (the 2005 debentures). Under the previous standards, our 2005 debentures were recognized entirely as a liability at
historical value. In accordance with adopting these new standards, we retrospectively recognized both a liability and an equity
component of the 2005 debentures at fair value. The liability component is recognized as the fair value of a similar instrument
that does not have a conversion feature at issuance. The equity component, which is the value of the conversion feature at
issuance, is recognized as the difference between the proceeds from the issuance of the 2005 debentures and the fair value of
the liability component, after adjusting for the deferred tax impact. The 2005 debentures were issued at a coupon rate of
2.95%, which was below that of a similar instrument that did not have a conversion feature (6.45%). Therefore, the valuation
of the debt component, using the income approach, resulted in a debt discount. The debt discount is reduced over the expected
life of the debt, which is also the stated life of the debt. These new standards are also applicable in accounting for our
convertible debt issued during 2009. See “Note 20: Borrowings” for further discussion.
As a result of applying these new standards retrospectively to all periods presented, we recognized the following incremental
effects on individual line items on the consolidated balance sheets:
The adoption of these new standards did not result in a change to our prior-
period consolidated statements of operations, as the
interest associated with our debt issuances is capitalized and added to the cost of qualified assets. The adoption of these new
standards did not result in a significant change to depreciation expense or earnings per common share for 2009.
60
December 27, 2008
Before
After
(In Millions)
Adoption
Adjustments
Adoption
Property, plant and equipment, net
$
17,544
$
$
17,574
Other long
-
term assets
1
$
6,092
$
(273
)
$
5,819
Long
-
term debt
$
1,886
$
(701
)
$
1,185
Common stock and capital in excess of par value
$
12,944
$
458
$
13,402
1
Primarily related to the adjustment made to the net deferred tax asset.