Annual report pursuant to Section 13 and 15(d)

Composition of Certain Financial Statement Captions

v2.4.0.8
Composition of Certain Financial Statement Captions
 12 Months Ended
Sep. 28, 2014
Notes to Financial Statements [Abstract]  
Note 2 - Composition of Certain Financial Statement Items
Note 2. Composition of Certain Financial Statement Items
    Accounts Receivable (in millions)
September 28, 2014
 
September 29, 2013
Trade, net of allowances for doubtful accounts of $5 and $2, respectively
$
2,362

 
$
2,066

Long-term contracts
17

 
27

Other
33

 
49

 
$
2,412

 
$
2,142



    Inventories (in millions)
September 28, 2014
 
September 29, 2013
Raw materials
$
1

 
$
2

Work-in-process
656

 
631

Finished goods
801

 
669

 
$
1,458

 
$
1,302



    Property, Plant and Equipment (in millions)
September 28, 2014
 
September 29, 2013
Land
$
225

 
$
212

Buildings and improvements
1,456

 
1,733

Computer equipment and software
1,349

 
1,425

Machinery and equipment
2,117

 
2,013

Furniture and office equipment
85

 
87

Leasehold improvements
247

 
218

Construction in progress
201

 
480

 
5,680

 
6,168

Less accumulated depreciation and amortization
(3,193
)
 
(3,173
)
 
$
2,487

 
$
2,995


During the first quarter of fiscal 2014, as a result of discussions with potential buyers and consideration of alternative uses for the separate asset groups that comprise one of the QMT division’s manufacturing facilities in Taiwan, the Company decreased its estimates of expected cash flows from those assets and recorded an impairment charge of $444 million in other expenses. The Company concluded that a triggering event had not occurred in the first quarter of fiscal 2014 that would have required impairment testing for its remaining QMT assets, including goodwill, as QMT’s licensing business plan did not utilize this manufacturing facility. During the third quarter of fiscal 2014, the Company updated QMT’s licensing business plan and related internal forecasts to reflect a further decrease in expected cash flows. The updated business plan reflects an acceleration of the Company’s plans to transition from QMT’s current generation technology to the licensing of its next generation IMOD (interferometric modulator) display technology and to focus on wearable devices. QMT will continue to make and sell current generation products for a period of time in support of certain existing customer requirements. As a result of this triggering event, the Company assessed the recoverability of the QMT division’s long-lived assets, performed a goodwill impairment test of the QMT reporting unit and recorded impairment charges of $64 million on property, plant and equipment and $100 million on goodwill, respectively, in other expenses. During fiscal 2013 and 2012, the Company recorded $158 million and $54 million in impairment charges on property, plant and equipment as a result of updates to internal forecasts that reflected reductions in expected cash flows. At September 28, 2014, the carrying values of the QMT division’s goodwill and property, plant and equipment were $35 million and $148 million, respectively, including $116 million in property, plant and equipment that was classified as held for sale and included in other assets.
Depreciation and amortization expense related to property, plant and equipment for fiscal 2014, 2013 and 2012 was $609 million, $515 million and $427 million, respectively. The gross book values of property under capital leases included in buildings and improvements were $1 million and $18 million at September 28, 2014 and September 29, 2013, respectively. These capital leases principally related to base station towers and buildings.
At September 28, 2014 and September 29, 2013, buildings and improvements and leasehold improvements that were leased to third parties or held for lease to third parties were negligible. Future minimum rental income on facilities leased to others is expected to be negligible.
Goodwill and Other Intangible Assets. The Company allocates goodwill to its reporting units for annual impairment testing purposes. Goodwill was allocable to reporting units included in the Company’s reportable and nonreportable segments, as described in Note 8, as follows (in millions):
 
September 28, 2014
 
September 29, 2013
QCT
$
3,467

 
$
2,875

QTL
712

 
706

Nonreportable segments
309

 
395

 
$
4,488

 
$
3,976


The increase in goodwill from September 29, 2013 to September 28, 2014 was the result of business acquisitions (Note 9), partially offset by impairments (Notes 2 and 12). Cumulative goodwill impairments were $260 million at September 28, 2014.
The components of other intangible assets, net were as follows (in millions):
 
September 28, 2014
 
September 29, 2013
 
Gross Carrying
Amount
 
Accumulated
Amortization
 
Gross Carrying
Amount
 
Accumulated
Amortization
Wireless spectrum
$
18

 
$
(9
)
 
$
19

 
$
(8
)
Marketing-related
78

 
(47
)
 
76

 
(37
)
Technology-based
4,460

 
(1,956
)
 
3,964

 
(1,512
)
Customer-related
85

 
(49
)
 
87

 
(36
)
 
$
4,641

 
$
(2,061
)
 
$
4,146

 
$
(1,593
)

All of these intangible assets are subject to amortization, other than acquired in-process research and development with carrying values of $55 million and $54 million at September 28, 2014 and September 29, 2013, respectively. Amortization expense related to these intangible assets was $543 million, $499 million and $473 million for fiscal 2014, 2013 and 2012, respectively. Amortization expense related to these intangible assets and acquired in-process research and development, beginning upon the expected completion of the underlying projects, is expected to be $521 million, $417 million, $302 million, $265 million and $242 million for fiscal 2015 to 2019, respectively, and $833 million thereafter.
    Other Current Liabilities (in millions)
September 28, 2014
 
September 29, 2013
Customer incentives and other customer-related liabilities
$
1,777

 
$
1,706

Other
466

 
613

 
$
2,243

 
$
2,319