Annual report pursuant to Section 13 and 15(d)

Composition of Certain Financial Statement Items

v3.8.0.1
Composition of Certain Financial Statement Items
 12 Months Ended
Sep. 24, 2017
Balance Sheet Related Disclosures [Abstract]  
Composition of Certain Financial Statement Items
Composition of Certain Financial Statement Items
Accounts Receivable (in millions)
 
 
 
 
September 24, 2017
 
September 25, 2016
Trade, net of allowances for doubtful accounts of $11 and $1, respectively
$
3,576

 
$
2,194

Long-term contracts
40

 
20

Other
16

 
5

 
$
3,632

 
$
2,219



Approximately 70% of the increase in accounts receivable was due to the short payment in the second quarter of fiscal 2017 of royalties reported by and deemed collectible from Apple’s contract manufacturers. This same amount is recorded in customer-related liabilities for Apple, since the Company does not have the contractual right to offset these amounts. The remaining increase in accounts receivable resulted from the accounts receivable relating to the Company’s recently formed RF360 Holdings joint venture (Note 9), increased revenues related to integrated circuits and the timing of the collection of payments from certain of the Company’s other licensees.
Inventories (in millions)
 
 
 
 
September 24, 2017
 
September 25, 2016
Raw materials
$
103

 
$
1

Work-in-process
799

 
847

Finished goods
1,133

 
708

 
$
2,035

 
$
1,556


Property, Plant and Equipment (in millions)
September 24, 2017
 
September 25, 2016
Land
$
195

 
$
192

Buildings and improvements
1,595

 
1,545

Computer equipment and software
1,609

 
1,426

Machinery and equipment
3,528

 
2,454

Furniture and office equipment
109

 
77

Leasehold improvements
310

 
254

Construction in progress
73

 
92

 
7,419

 
6,040

Less accumulated depreciation and amortization
(4,203
)
 
(3,734
)
 
$
3,216

 
$
2,306


Depreciation and amortization expense related to property, plant and equipment for fiscal 2017, 2016 and 2015 was $684 million, $624 million and $625 million, respectively. The gross book values of property under capital leases included in buildings and improvements were negligible at September 24, 2017 and September 25, 2016.
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 2017 and 2016 (in millions):
 
QCT
 
QTL
 
Nonreportable Segments
 
Total
Balance at September 27, 2015
$
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

Acquisitions
841

 
23

 
11

 
875

Impairments
—

 
—

 
—

 
—

Other (1)
66

 
—

 
3

 
69

Balance at September 24, 2017 (2)
$
5,581

 
$
741

 
$
301

 
$
6,623


(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 at both September 24, 2017 and September 25, 2016.
The components of other intangible assets, net were as follows (in millions):
 
September 24, 2017
 
September 25, 2016
 
Gross Carrying
Amount
 
Accumulated
Amortization
 
Weighted-average amortization period
(years)
 
Gross Carrying
Amount
 
Accumulated
Amortization
 
Weighted-average amortization period
(years)
Wireless spectrum
$
1

 
$
—

 
20
 
$
2

 
$
(2
)
 
5
Marketing-related
77

 
(52
)
 
4
 
119

 
(77
)
 
8
Technology-based
6,413

 
(2,818
)
 
10
 
5,900

 
(2,459
)
 
10
Customer-related
149

 
(33
)
 
9
 
21

 
(4
)
 
7
 
$
6,640

 
$
(2,903
)
 
10
 
$
6,042

 
$
(2,542
)
 
10

All of these intangible assets are subject to amortization, other than acquired in-process research and development with carrying values of $74 million and $83 million at September 24, 2017 and September 25, 2016, respectively. Amortization expense related to these intangible assets was $777 million, $804 million and $591 million for fiscal 2017, 2016 and 2015, 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 $780 million, $734 million, $622 million, $507 million and $415 million for each of the subsequent five years from fiscal 2018 through 2022, respectively, and $679 million thereafter.
Other Current Liabilities (in millions)
 
 
 
 
September 24,
2017
 
September 25,
2016
Customer incentives and other customer-related liabilities
$
2,804

 
$
1,710

Accrual for TFTC fine (Note 7)
778

 
—

Other
1,174

 
551

 
$
4,756

 
$
2,261


Customer incentives and other customer-related liabilities substantially consist of amounts payable to customers for incentive and other arrangements, including volume-related and other pricing rebates and cost reimbursements for marketing and other activities involving certain of the Company’s products and technologies. The corresponding charges for such arrangements were recorded as a reduction to revenues.
Accumulated Other Comprehensive Income. Changes in the components of accumulated other comprehensive income, net of income taxes, in Qualcomm stockholders’ equity during fiscal 2017 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
 
Other Gains
 
Total Accumulated Other Comprehensive Income
Balance at September 25, 2016
$
(161
)
 
$
6

 
$
532

 
$
51

 
$
—

 
$
428

Other comprehensive (loss) income before reclassifications
309

 
6

 
(102
)
 
(49
)
 
4

 
168

Reclassifications from accumulated other comprehensive income
(1
)
 
11

 
(212
)
 
(10
)
 
—

 
(212
)
Other comprehensive (loss) income
308

 
17

 
(314
)
 
(59
)
 
4

 
(44
)
Balance at September 24, 2017
$
147

 
$
23

 
$
218

 
$
(8
)
 
$
4

 
$
384


Reclassifications from accumulated other comprehensive income related to net gains on available-for-sale securities of $201 million, $83 million and $212 million during fiscal 2017, 2016 and 2015, respectively, were recorded in investment and other 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 2017 and 2015 were negligible. Reclassifications from accumulated other comprehensive income related to derivative instruments of $10 million for fiscal 2017 were recorded in revenues, cost of revenues, research and development expenses and selling, general and administrative expenses. Reclassifications from accumulated other comprehensive income related to derivative instruments during fiscal 2016 and 2015 were negligible.
Other Income, Costs and Expenses. Other expenses in fiscal 2017 consisted of a $927 million charge related to the KFTC fine (Note 7), including related foreign currency losses, a $778 million charge related to the TFTC fine (Note 7) and $37 million in restructuring and restructuring-related charges related to the Company’s Strategic Realignment Plan (Note 10).
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 semiconductor 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 modified 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, partially offset by $138 million in gains on sales of certain property, plant and equipment.

Investment and Other Income, Net (in millions)
 
 
 
 
 
 
2017
 
2016
 
2015
Interest and dividend income
$
619

 
$
611

 
$
527

Net realized gains on marketable securities
456

 
239

 
451

Net realized gains on other investments
74

 
49

 
49

Impairment losses on marketable securities
(131
)
 
(112
)
 
(163
)
Impairment losses on other investments
(46
)
 
(60
)
 
(37
)
Net gains (losses) on derivative instruments
32

 
(8
)
 
17

Equity in net losses of investees
(74
)
 
(84
)
 
(32
)
Net losses on foreign currency transactions
(30
)
 
—

 
—

Net gains on deconsolidation of subsidiaries
—

 
—

 
3

 
$
900

 
$
635

 
$
815


There were no net impairment losses on marketable securities related to the noncredit portion of losses on debt securities recognized in other comprehensive income in fiscal 2017, and such losses were $37 million and $23 million in fiscal 2016 and 2015, respectively. The ending balance of the credit loss portion of other-than-temporary impairments on debt securities held by the Company was negligible and $55 million at September 24, 2017 and September 25, 2016, respectively.