Annual report pursuant to Section 13 and 15(d)

Composition of Certain Financial Statement Items

v3.5.0.2
Composition of Certain Financial Statement Items
 12 Months Ended
Sep. 25, 2016
Balance Sheet Related Disclosures [Abstract]  
Composition of Certain Financial Statement Items
Composition of Certain Financial Statement Items
Accounts Receivable (in millions)
 
 
 
 
September 25, 2016
 
September 27, 2015
Trade, net of allowances for doubtful accounts of $1 and $6, respectively
$
2,194

 
$
1,941

Long-term contracts
20

 
11

Other
5

 
12

 
$
2,219

 
$
1,964


Inventories (in millions)
 
 
 
 
September 25, 2016
 
September 27, 2015
Raw materials
$
1

 
$
1

Work-in-process
847

 
550

Finished goods
708

 
941

 
$
1,556

 
$
1,492


Property, Plant and Equipment (in millions)
September 25, 2016
 
September 27, 2015
Land
$
192

 
$
212

Buildings and improvements
1,545

 
1,544

Computer equipment and software
1,426

 
1,422

Machinery and equipment
2,454

 
2,287

Furniture and office equipment
77

 
83

Leasehold improvements
254

 
274

Construction in progress
92

 
72

 
6,040

 
5,894

Less accumulated depreciation and amortization
(3,734
)
 
(3,360
)
 
$
2,306

 
$
2,534


Depreciation and amortization expense related to property, plant and equipment for fiscal 2016, 2015 and 2014 was $624 million, $625 million and $609 million, respectively. The gross book values of property under capital leases included in buildings and improvements were negligible at September 25, 2016 and September 27, 2015.
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 2016 and 2015 (in millions):
 
QCT
 
QTL
 
Nonreportable Segments
 
Total
Balance at September 28, 2014
$
3,467

 
$
712

 
$
309

 
$
4,488

Acquisitions
998

 
6

 
254

 
1,258

Impairments
—

 
—

 
(260
)
 
(260
)
Other (1)
(4
)
 
—

 
(3
)
 
(7
)
Balance at September 27, 2015 (2)
4,461

 
718

 
300

 
5,479

Acquisitions
172

 
—

 
—

 
172

Impairments
—

 
—

 
(17
)
 
(17
)
Other (1)
41

 
—

 
4

 
45

Balance at September 25, 2016 (2)
$
4,674

 
$
718

 
$
287

 
$
5,679


(1)
Includes changes in goodwill amounts resulting from foreign currency translation, purchase accounting adjustments and, in fiscal 2016, the sale of the Company’s business that provided augmented reality applications.
(2)
Cumulative goodwill impairments were $537 million and $520 million at September 25, 2016 and September 27, 2015, respectively.
The components of other intangible assets, net were as follows (in millions):
 
September 25, 2016
 
September 27, 2015
 
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
 
$
2

 
$
(2
)
 
5
Marketing-related
119

 
(77
)
 
8
 
93

 
(59
)
 
8
Technology-based
5,900

 
(2,459
)
 
10
 
5,735

 
(2,078
)
 
10
Customer-related
21

 
(4
)
 
7
 
111

 
(60
)
 
4
 
$
6,042

 
$
(2,542
)
 
10
 
$
5,941

 
$
(2,199
)
 
10

All of these intangible assets are subject to amortization, other than acquired in-process research and development with carrying values of $83 million and $196 million at September 25, 2016 and September 27, 2015, respectively. Amortization expense related to these intangible assets was $804 million, $591 million and $543 million for fiscal 2016, 2015 and 2014, 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 $674 million, $635 million, $597 million, $494 million and $374 million for each of the subsequent five years from fiscal 2017 through 2021, respectively, and $726 million thereafter.
Other Current Liabilities (in millions)
 
 
 
 
September 25,
2016
 
September 27,
2015
Customer incentives and other customer-related liabilities
$
1,710

 
$
1,894

Other
551

 
462

 
$
2,261

 
$
2,356


Accumulated Other Comprehensive Income. Changes in the components of accumulated other comprehensive income, net of income taxes, in Qualcomm stockholders’ equity during fiscal 2016 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 27, 2015
$
(160
)
 
$
4

 
$
297

 
$
54

 
$
195

Other comprehensive (loss) income before reclassifications
(22
)
 
14

 
306

 
(4
)
 
294

Reclassifications from accumulated other comprehensive income
21

 
(12
)
 
(71
)
 
1

 
(61
)
Other comprehensive (loss) income
(1
)
 
2

 
235

 
(3
)
 
233

Balance at September 25, 2016
$
(161
)
 
$
6

 
$
532

 
$
51

 
$
428


Reclassifications from accumulated other comprehensive income related to net gains on available-for-sale securities of $83 million, $212 million and $360 million during fiscal 2016, 2015 and 2014, respectively, were recorded in investment income, net (Note 2). Reclassifications from accumulated other comprehensive income related to foreign currency translation losses of $21 million during fiscal 2016 were recorded in selling, general and administrative expenses and other operating expenses. Reclassifications from accumulated other comprehensive income related to foreign currency translation adjustments during fiscal 2015 and 2014 were negligible. Reclassifications from accumulated other comprehensive income related to derivative instruments during fiscal 2016 and 2015 were negligible. Reclassifications from accumulated other comprehensive income related to derivative instruments of $26 million for fiscal 2014 were recorded in revenues, cost of revenues, research and development expenses and selling, general and administrative expenses.
Other Income, Costs and Expenses. Other income for fiscal 2016 included a gain of $380 million on the sale of wireless spectrum in the United Kingdom that was held by the QSI (Qualcomm Strategic Initiatives) segment in the first quarter of fiscal 2016 for $232 million in cash and $275 million in deferred payments due in 2020 to 2023, which were recorded at their present values in other assets. Other income for fiscal 2016 also included $202 million in restructuring and restructuring-related charges, which were partially offset by a $48 million gain on the sale of the Company’s business that provided augmented reality applications, all of which related to the Company’s Strategic Realignment Plan.
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 renminbi (approximately $975 million), which the Company 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. Other expenses in fiscal 2014 also included a $16 million goodwill impairment charge related to the Company’s former QRS (Qualcomm Retail Solutions) 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).
Investment Income, Net (in millions)
 
 
 
 
 
 
2016
 
2015
 
2014
Interest and dividend income
$
611

 
$
527

 
$
586

Net realized gains on marketable securities
239

 
451

 
770

Net realized gains on other investments
49

 
49

 
56

Impairment losses on marketable securities
(112
)
 
(163
)
 
(156
)
Impairment losses on other investments
(60
)
 
(37
)
 
(24
)
Net (losses) gains on derivative instruments
(8
)
 
17

 
5

Equity in net losses of investees
(84
)
 
(32
)
 
(10
)
Net gains on deconsolidation of subsidiaries
—

 
3

 
6

 
$
635

 
$
815

 
$
1,233


Net impairment losses on marketable securities related to the noncredit portion of losses on debt securities recognized in other comprehensive income were $37 million, $23 million and negligible in fiscal 2016, 2015 and 2014, respectively. The ending balance of the credit loss portion of other-than-temporary impairments on debt securities held by the Company was $55 million and $12 million at September 25, 2016 and September 27, 2015, respectively.