Intel 2013 Annual Report Download - page 62

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Other-Than-Temporary Impairment
Our available-for-sale investments and non-marketable and other equity investments are subject to a periodic
impairment review. Investments are considered impaired when the fair value is below the investment’s adjusted cost
basis. Impairments affect earnings as follows:
• Marketable debt instruments when the fair value is below amortized cost and we intend to sell the instrument, or
when it is more likely than not that we will be required to sell the instrument before recovery of its amortized
cost basis, or when we do not expect to recover the entire amortized cost basis of the instrument (that is, a
credit loss exists). When we do not expect to recover the entire amortized cost basis of the instrument, we
separate other-than-temporary impairments into amounts representing credit losses, which are recognized in
interest and other, net, and amounts related to all other factors, which are recognized in other comprehensive
income (loss).
• Marketable equity securities 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
below cost, and our ability and intent to hold the investment for a sufficient period of time to allow for recovery of
value in the foreseeable future. We also consider specific adverse conditions related to the financial health of,
and the business outlook for, the investee, which may include industry and sector performance, changes in
technology, operational and financing cash flow factors, and changes in the investee’s credit rating. We record
other-than-temporary impairment charges on marketable equity securities and marketable equity method
investments in gains (losses) on equity investments, net.
• Non-marketable equity investments based on our assessment of the severity and duration of the impairment,
and qualitative and quantitative analysis, including:
• the investee’s revenue and earnings trends relative to pre-defined milestones and overall business
prospects;
• the technological feasibility of the investee’s products and technologies;
• the general market conditions in the investee’s industry or geographic area, including adverse regulatory or
economic changes;
• factors related to the investee’s ability to remain in business, such as the investee’s liquidity and debt ratios,
and the rate at which the investee is using its cash; and
• the investee’s receipt of additional funding at a lower valuation.
We record other-than-temporary impairment charges for non-marketable cost method investments and equity
method investments in gains (losses) on equity investments, net.
Derivative Financial Instruments
Our primary objective for holding derivative financial instruments is to manage currency exchange rate and interest
rate risk, and, to a lesser extent, equity market risk, commodity price risk, and credit risk. Our derivative financial
instruments are recorded at fair value and are included in other current assets, other long-term assets, other
accrued liabilities, or other long-term liabilities.
Our accounting policies for derivative financial instruments are based on whether they meet the criteria for
designation as a cash flow hedge. A designated hedge with exposure to variability in the functional currency
equivalent of the future foreign currency cash flows of a forecasted transaction is one example of a cash flow
hedge. The criteria for designating a derivative as a cash flow hedge include the assessment of the instrument’s
effectiveness in risk reduction, matching of the derivative instrument to its underlying transaction, and the
assessment of the probability that the underlying transaction will occur. For derivatives with cash flow hedge
accounting designation, we report the after-tax gain or loss from the effective portion of the hedge as a component
of accumulated other comprehensive income (loss) and reclassify it into earnings in the same period or periods in
which the hedged transaction affects earnings, and in the same line item on the consolidated statements of income
as the impact of the hedged transaction. Derivatives that we designate as cash flow hedges are classified in the
consolidated statements of cash flows in the same section as the underlying item, primarily within cash flows from
operating activities.
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INTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)