Annual report pursuant to Section 13 and 15(d)

Composition of Certain Financial Statement Items

v3.3.0.814
Composition of Certain Financial Statement Items
 12 Months Ended
Sep. 27, 2015
Notes to Financial Statements [Abstract]  
Composition of Certain Financial Statement Items
Note 2. Composition of Certain Financial Statement Items
Accounts Receivable (in millions)
 
 
 
 
September 27, 2015
 
September 28, 2014
Trade, net of allowances for doubtful accounts of $6 and $5, respectively
$
1,941

 
$
2,362

Long-term contracts
11

 
17

Other
12

 
33

 
$
1,964

 
$
2,412


Inventories (in millions)
 
 
 
 
September 27,
2015
 
September 28,
2014
Raw materials
$
1

 
$
1

Work-in-process
550

 
656

Finished goods
941

 
801

 
$
1,492

 
$
1,458


Property, Plant and Equipment (in millions)
September 27, 2015
 
September 28, 2014
Land
$
212

 
$
225

Buildings and improvements
1,544

 
1,456

Computer equipment and software
1,422

 
1,349

Machinery and equipment
2,287

 
2,117

Furniture and office equipment
83

 
85

Leasehold improvements
274

 
247

Construction in progress
72

 
201

 
5,894

 
5,680

Less accumulated depreciation and amortization
(3,360
)
 
(3,193
)
 
$
2,534

 
$
2,487


Depreciation and amortization expense related to property, plant and equipment for fiscal 2015, 2014 and 2013 was $625 million, $609 million and $515 million, respectively. The gross book values of property under capital leases included in buildings and improvements were negligible at September 27, 2015 and September 28, 2014, respectively.
Goodwill and Other Intangible Assets. The Company allocates goodwill to its reporting units for annual impairment testing purposes. The following table presents the goodwill allocated to the Company’s reportable and nonreportable segments, as described in Note 8, as well as the changes in the carrying amounts of goodwill during fiscal 2015 and 2014 (in millions):
 
QCT
 
QTL
 
Nonreportable Segments
 
Total
Balance at September 29, 2013
$
2,875

 
$
706

 
$
395

 
$
3,976

Acquisitions
592

 
6

 
30

 
628

Impairments
—

 
—

 
(116
)
 
(116
)
Balance at September 28, 2014 (1)
3,467

 
712

 
309

 
4,488

Acquisitions
998

 
6

 
254

 
1,258

Impairments
—

 
—

 
(260
)
 
(260
)
Other (2)
(4
)
 
—

 
(3
)
 
(7
)
Balance at September 27, 2015 (1)
$
4,461

 
$
718

 
$
300

 
$
5,479


(1)
Cumulative goodwill impairments were $520 million and $260 million at September 27, 2015 and September 28, 2014, respectively.
(2)
Includes changes in goodwill amounts resulting from foreign currency translation and purchase accounting adjustments.
The components of other intangible assets, net were as follows (in millions):
 
September 27, 2015
 
September 28, 2014
 
Gross Carrying
Amount
 
Accumulated
Amortization
 
Weighted-average amortization period
(years)
 
Gross Carrying
Amount
 
Accumulated
Amortization
 
Weighted-average amortization period
(years)
Wireless spectrum
$
2

 
$
(2
)
 
5
 
$
18

 
$
(9
)
 
14
Marketing-related
93

 
(59
)
 
8
 
78

 
(47
)
 
9
Technology-based
5,735

 
(2,078
)
 
10
 
4,460

 
(1,956
)
 
11
Customer-related
111

 
(60
)
 
4
 
85

 
(49
)
 
6
 
$
5,941

 
$
(2,199
)
 
10
 
$
4,641

 
$
(2,061
)
 
11

All of these intangible assets are subject to amortization, other than acquired in-process research and development with carrying values of $196 million and $55 million at September 27, 2015 and September 28, 2014, respectively. Amortization expense related to these intangible assets was $591 million, $543 million and $499 million for fiscal 2015, 2014 and 2013, 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 $727 million, $593 million, $550 million, $515 million and $445 million for each of the subsequent five years from fiscal 2016 through 2020, respectively, and $912 million thereafter.
Other Current Liabilities (in millions)
 
 
 
 
September 27,
2015
 
September 28,
2014
Customer incentives and other customer-related liabilities
$
1,894

 
$
1,777

Other
462

 
466

 
$
2,356

 
$
2,243


Other Comprehensive Income. Other comprehensive income is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources, other than net income and including foreign currency translation adjustments and unrealized gains and losses on marketable securities and derivative instruments. Changes in the components of accumulated other comprehensive income, net of income taxes, in Qualcomm stockholders’ equity during fiscal year ended September 27, 2015 were as follows (in millions):
 
Foreign Currency Translation Adjustment
 
Noncredit Other-than-Temporary Impairment Losses and Subsequent Changes in Fair Value for Certain Available-for-Sale Debt Securities
 
Net Unrealized Gain (Loss) on Other Available-for-Sale Securities
 
Net Unrealized Gain (Loss) on Derivative Instruments
 
Total Accumulated Other Comprehensive Income
Balance at September 28, 2014
$
(113
)
 
$
24

 
$
723

 
$
—

 
$
634

Other comprehensive (loss) income before reclassifications
(47
)
 
(19
)
 
(215
)
 
54

 
(227
)
Reclassifications from accumulated other comprehensive (loss) income
—

 
(1
)
 
(211
)
 
—

 
(212
)
Other comprehensive (loss) income
(47
)
 
(20
)
 
(426
)
 
54

 
(439
)
Balance at September 27, 2015
$
(160
)
 
$
4

 
$
297

 
$
54

 
$
195


In the third quarter of fiscal 2015, the Company entered into U.S. Treasury rate locks in anticipation of its debt offering (Note 6), which were designated as cash flow hedges. This resulted in the deferral of gains of $56 million in accumulated other comprehensive income, which is recognized ratably over the 10- and 30-year lives of the underlying notes associated with the U.S. Treasury rate locks. Reclassifications from accumulated other comprehensive income related to available-for-sale securities and foreign currency translation adjustments of $212 million and $360 million for fiscal 2015 and fiscal 2014, respectively, were recorded in investment income, net (Note 2). Reclassifications from accumulated other comprehensive income related to derivative instruments of $26 million for fiscal 2014 were recorded in revenues, cost of equipment and services revenues, research and development expenses and selling, general and administrative expenses.
Other Costs and Expenses. On February 9, 2015, the Company announced that it had reached a resolution with the China National Development and Reform Commission (NDRC) regarding its investigation of the Company relating to China’s Anti-Monopoly Law (AML) and the Company’s licensing business and certain interactions between the Company’s licensing business and its chipset business. The NDRC issued an Administrative Sanction Decision finding that the Company had violated the AML, and the Company agreed to implement a rectification plan that modifies certain of its business practices in China. In addition, the NDRC imposed a fine on the Company of 6.088 billion Chinese Yuan renminbi (approximately $975 million), which the Company has paid. The Company recorded the amount of the fine in the second quarter of fiscal 2015 in other expenses. Other expenses in fiscal 2015 also included $255 million and $11 million in impairment charges on goodwill and intangible assets, respectively, related to the Company’s content and push-to-talk services and display businesses and $190 million in restructuring and restructuring-related charges related to the Company’s Strategic Realignment Plan (Note 10), partially offset by $138 million in gains on sales of certain property, plant and equipment.
Other expenses in fiscal 2014 were comprised of $507 million and $100 million in certain property, plant and equipment and goodwill impairment charges, respectively, and $19 million in restructuring-related costs incurred by one of the Company’s display businesses. At September 28, 2014, the carrying values of such 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. Other expenses in fiscal 2014 also included a $16 million goodwill impairment charge related to the Company’s former QRS division and a $15 million legal settlement, partially offset by the reversal of the $173 million accrual recorded in fiscal 2013 related to the ParkerVision verdict against us, which was overturned (Note 7).
Other expenses in fiscal 2013 were comprised of the $173 million ParkerVision charge and a $158 million impairment charge related to certain property, plant and equipment of one of the Company’s display businesses.
Investment Income, Net (in millions)
 
 
 
 
 
 
2015
 
2014
 
2013
Interest and dividend income
$
527

 
$
586

 
$
697

Net realized gains on marketable securities
451

 
770

 
317

Net realized gains on other investments
49

 
56

 
52

Impairment losses on marketable securities
(163
)
 
(156
)
 
(72
)
Impairment losses on other investments
(37
)
 
(24
)
 
(13
)
Net gains on derivative instruments
17

 
5

 
—

Equity in net losses of investees
(32
)
 
(10
)
 
(6
)
Net gains on deconsolidation of subsidiaries
3

 
6

 
12

 
$
815

 
$
1,233

 
$
987


Net impairment losses on marketable securities related to the noncredit portion of losses on debt securities recognized in other comprehensive income were $23 million in fiscal 2015 and were negligible in fiscal 2014 and 2013.