Annual report pursuant to Section 13 and 15(d)

Composition of Certain Financial Statement Items

v3.10.0.1
Composition of Certain Financial Statement Items
 12 Months Ended
Sep. 30, 2018
Balance Sheet Related Disclosures [Abstract]  
Composition of Certain Financial Statement Items
Composition of Certain Financial Statement Items
Accounts Receivable (in millions)
 
 
 
 
September 30, 2018
 
September 24, 2017
Trade, net of allowances for doubtful accounts of $56 and $11, respectively
$
2,848

 
$
3,576

Long-term contracts
20

 
40

Other
36

 
16

 
$
2,904

 
$
3,632


Accounts receivable at the end of both fiscal 2018 and fiscal 2017 included approximately $960 million related 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 was recorded in customer-related liabilities (in other current liabilities) for Apple, since we do not have the contractual right to offset these amounts.
Inventories (in millions)
 
 
 
 
September 30, 2018
 
September 24, 2017
Raw materials
$
72

 
$
103

Work-in-process
715

 
799

Finished goods
906

 
1,133

 
$
1,693

 
$
2,035


Property, Plant and Equipment (in millions)
September 30, 2018
 
September 24, 2017
Land
$
186

 
$
195

Buildings and improvements
1,575

 
1,595

Computer equipment and software
1,419

 
1,609

Machinery and equipment
3,792

 
3,528

Furniture and office equipment
85

 
109

Leasehold improvements
325

 
310

Construction in progress
79

 
73

 
7,461

 
7,419

Less accumulated depreciation and amortization
(4,486
)
 
(4,203
)
 
$
2,975

 
$
3,216


Depreciation and amortization expense related to property, plant and equipment for fiscal 2018, 2017 and 2016 was $776 million, $684 million and $624 million, respectively. The gross book values of property under capital leases included in buildings and improvements were negligible at September 30, 2018 and September 24, 2017.
Goodwill and Other Intangible Assets. We allocate goodwill to our reporting units for annual impairment testing purposes. The following table presents the goodwill allocated to our reportable and nonreportable segments, as described in Note 8, as well as the changes in the carrying amounts of goodwill during fiscal 2018 and 2017 (in millions):
 
QCT
 
QTL
 
Nonreportable Segments
 
Total
Balance at September 25, 2016
$
4,674

 
$
718

 
$
287

 
$
5,679

Acquisitions
841

 
23

 
11

 
875

Other (1)
66

 
—

 
3

 
69

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

 
741

 
301

 
6,623

Acquisitions
—

 
—

 
—

 
—

Impairments
—

 
(22
)
 
(107
)
 
(129
)
Other (1)
6

 
(1
)
 
(1
)
 
4

Balance at September 30, 2018 (2)
$
5,587

 
$
718

 
$
193

 
$
6,498


(1)
Includes changes in goodwill amounts resulting from foreign currency translation, purchase accounting adjustments.
(2)
Cumulative goodwill impairments were $666 million and $537 million at September 30, 2018 and September 24, 2017, respectively.
The components of other intangible assets, net were as follows (in millions):
 
September 30, 2018
 
September 24, 2017
 
Gross Carrying
Amount
 
Accumulated
Amortization
 
Weighted-average amortization period
(years)
 
Gross Carrying
Amount
 
Accumulated
Amortization
 
Weighted-average amortization period
(years)
Wireless spectrum
$
1

 
$
—

 
20
 
$
1

 
$
—

 
20
Marketing-related
51

 
(39
)
 
5
 
77

 
(52
)
 
4
Technology-based
6,334

 
(3,461
)
 
10
 
6,413

 
(2,818
)
 
10
Customer-related
97

 
(28
)
 
10
 
149

 
(33
)
 
9
 
$
6,483

 
$
(3,528
)
 
10
 
$
6,640

 
$
(2,903
)
 
10

All of these intangible assets are subject to amortization, other than acquired in-process research and development with carrying values of $74 million at September 24, 2017. At September 30, 2018, all acquired in-process research and development projects were completed and are being amortized over their useful lives. Amortization expense related to these intangible assets was $785 million, $777 million and $804 million for fiscal 2018, 2017 and 2016, respectively. Amortization expense related to these intangible assets is expected to be $733 million, $630 million, $517 million, $418 million and $285 million for each of the five years from fiscal 2019 through 2023, respectively, and $372 million thereafter.
Other Current Liabilities (in millions)
 
 
 
 
September 30,
2018
 
September 24,
2017
Customer incentives and other customer-related liabilities
$
3,347

 
$
2,804

Accrual for EC fine (Note 7)
1,167

 
—

Income taxes payable
453

 
312

Accrual for TFTC fine (Note 7)
—

 
778

RF360 Holdings Put and Call Option (Note 9)
1,137

 
—

Other
721

 
862

 
$
6,825

 
$
4,756


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 our 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 2018 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 24, 2017
$
147

 
$
23

 
$
218

 
$
(8
)
 
$
4

 
$
384

Other comprehensive (loss) income before reclassifications
(136
)
 
—

 
29

 
(17
)
 
(3
)
 
(127
)
Reclassifications from accumulated other comprehensive income
—

 
—

 
(4
)
 
12

 
—

 
8

Other comprehensive (loss) income
(136
)
 
—

 
25

 
(5
)
 
(3
)
 
(119
)
Balance at September 30, 2018
$
11

 
$
23

 
$
243

 
$
(13
)
 
$
1

 
$
265


Reclassifications from accumulated other comprehensive income related to net gains on available-for-sale securities were negligible, $201 million and $83 million during fiscal 2018, 2017 and 2016, respectively, and 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 2018 and 2017 were negligible. Reclassifications from accumulated other comprehensive income related to derivative instruments of $12 million, $10 million and negligible for fiscal 2018, 2017 and 2016, respectively, were recorded in revenues, cost of revenues, research and development expenses and selling, general and administrative expenses.
Other Income, Costs and Expenses. Other expenses in fiscal 2018 consisted of a $2.0 billion charge related to the termination of our purchase agreement to acquire NXP (Note 9), a $1.2 billion charge related to the European Commission (EC) fine (Note 7), $629 million in restructuring and restructuring-related charges related to our Cost Plan (Note 10) and a $676 million benefit related to the settlement of the Taiwan Fair Trade Commission (TFTC) investigation (Note 7).
Other expenses for fiscal 2017 consisted of a $927 million charge related to the Korea Fair Trade Commission (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 our 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 noncurrent 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 our business that provided augmented reality applications, all of which related to our Strategic Realignment Plan.
Investment and Other Income, Net (in millions)
 
 
 
 
 
 
2018
 
2017
 
2016
Interest and dividend income
$
625

 
$
619

 
$
611

Net realized gains on marketable securities
41

 
456

 
239

Net realized gains on other investments
83

 
74

 
49

Impairment losses on marketable securities
(6
)
 
(131
)
 
(112
)
Impairment losses on other investments
(69
)
 
(46
)
 
(60
)
Net (losses) gains on derivative instruments
(27
)
 
32

 
(8
)
Equity in net losses of investees
(145
)
 
(74
)
 
(84
)
Net gains (losses) on foreign currency transactions
37

 
(30
)
 
—

 
$
539

 
$
900

 
$
635