QUALCOMM Incorporated Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Composition of Certain Financial Statement Items

Composition of Certain Financial Statement Items

12 Months Ended

Sep. 25, 2022

Balance Sheet Related Disclosures [Abstract]

Composition of Certain Financial Statement Items


Accounts Receivable (in millions)
	September 25, 2022		September 26, 2021
Trade, net of allowances for doubtful accounts	$	4,175	$	2,214

Unbilled	1,435		1,354
Other	33		11
	$	5,643	$	3,579


Inventories (in millions)
	September 25, 2022		September 26, 2021
Raw materials	$	221	$	267
Work-in-process	3,329		1,475
Finished goods	2,791		1,486
	$	6,341	$	3,228


Property, Plant and Equipment (in millions)
	September 25, 2022		September 26, 2021
Land	$	170	$	172
Buildings and improvements	1,767		1,642
Computer equipment and software	1,680		1,483
Machinery and equipment	7,349		6,420
Furniture and office equipment	105		94
Leasehold improvements	369		374
Construction in progress	330		269
	11,770		10,454
Less accumulated depreciation and amortization	(6,602)		(5,895)
	$	5,168	$	4,559

Depreciation and amortization expense related to property, plant and equipment for fiscal 2022, 2021 and 2020 was $1.3 billion, $1.0 billion and $772 million, respectively.

Goodwill and Other Intangible Assets. We allocate goodwill to our reporting units for impairment testing purposes. The following table presents the goodwill allocated to our segments, as described in Note 8, as well as the changes in the carrying amounts of goodwill during fiscal 2022 and 2021 (in millions):


	QCT		QTL		Total
Balance at September 27, 2020	$	5,605	$	718	$	6,323
Acquisitions	912		5		917

Foreign currency translation adjustments	6		—		6
Balance at September 26, 2021 (1)	6,523		723		7,246
Acquisitions	3,375		12		3,387

Foreign currency translation adjustments	(121)		(4)		(125)
Balance at September 25, 2022 (1)	$	9,777	$	731	$	10,508

(1) Cumulative goodwill impairments were $812 million at both September 25, 2022 and September 26, 2021.

The components of other intangible assets, net were as follows (in millions):


	September 25, 2022					September 26, 2021
	Gross Carrying Amount		Accumulated Amortization		Weighted-average amortization period (years)	Gross Carrying Amount		Accumulated Amortization		Weighted-average amortization period (years)
Technology-based	$	5,517	$	(3,669)	12	$	5,385	$	(3,971)	11
Other	90		(56)		10	93		(49)		10
	$	5,607	$	(3,725)	10	$	5,478	$	(4,020)	11

All of these intangible assets are subject to amortization, other than acquired in-process research and development which had a carrying value of $546 million and $247 million at September 25, 2022 and September 26, 2021, respectively. Amortization expense related to these intangible assets was $482 million, $537 million and $621 million for fiscal 2022, 2021 and 2020, respectively. At September 25, 2022, amortization expense related to other intangible assets, including acquired in-process research and development beginning upon the completion of the underlying projects, is expected to be $429 million, $275 million, $245 million, $246 million and $168 million for each of the five years from fiscal 2023 through 2027, respectively, and $519 million thereafter.

Equity Method and Non-marketable Equity Investments. The carrying values of our equity method and non-marketable equity investments are recorded in other assets and were as follows (in millions):


	September 25, 2022		September 26, 2021
Equity method investments	$	189	$	214
Non-marketable equity investments	1,105		1,051
	$	1,294	$	1,265


Other Current Liabilities (in millions)
	September 25, 2022		September 26, 2021
Customer incentives and other customer-related liabilities	$	1,879	$	1,974
Accrual for EC fines (Note 7)	245		1,522
Income taxes payable	634		862

Other	931		656
	$	3,689	$	5,014

Revenues. We disaggregate our revenues by segment (Note 8), by product and service (as presented on our consolidated statements of operations), and for our QCT segment, by revenue stream, which is based on the industry and application in which our products are sold (as presented below). In certain cases, the determination of QCT revenues by industry and application requires the use of certain assumptions. Substantially all of QCT’s revenues consist of equipment revenues that are recognized at a point in time, and substantially all of QTL’s revenues represent licensing revenues that are recognized over time and are principally from royalties generated through our licensees’ sales of mobile handsets. QCT revenue streams were as follows (in millions):


	2022	2021	2020
Handsets (1)			$	25,027	$	16,830	$	10,461
RFFE (2)			4,330		4,158		2,362
Automotive (3)			1,372		975		644
IoT (internet of things) (4)			6,948		5,056		3,026
Total QCT revenues			$	37,677	$	27,019	$	16,493

(1) Includes revenues from products sold for use in mobile handsets, excluding RFFE (radio frequency front-end) components.

(2) Includes all revenues from sales of 4G, 5G sub-6 and 5G millimeter wave RFFE products (a substantial portion of which are sold for use in mobile handsets) and excludes radio frequency transceiver components.

(3) Includes revenues from products sold for use in automobiles, including connectivity, digital cockpit and advanced driver assistance and automated driving.

(4) Primarily includes products sold for use in the following industries and applications: consumer (including computing, voice and music and XR), edge networking (including mobile broadband and wireless access points) and industrial (including handhelds, retail, transportation and logistics and utilities).

Revenue recognized from performance obligations satisfied (or partially satisfied) in previous periods were as follows (in millions):


	2022 (1)		2021 (2)		2020 (3)
Revenues recognized from previously satisfied performance obligations	$	788	$	283	$	1,480

(1) Primarily related to certain QCT sales-based royalty revenues related to system software, certain QCT customer incentives and, to a lesser extent, QTL royalty revenues recognized related to devices sold in prior periods (including adjustments to prior period royalty estimates, which includes the impact of the reporting by our licensees of actual royalties due).

(2) Primarily related to certain QCT customer incentives, QTL revenues recognized related to devices sold in prior periods (including adjustments to prior period royalty estimates, which includes the impact of the reporting by our licensees of actual royalties due) and the release of a variable constraint against revenues not previously allocated to our segment results (Note 8).

(3) Primarily related to licensing revenues recognized in the fourth quarter of fiscal 2020 (a portion of which was attributable to fiscal 2020) resulting from the settlement with Huawei and, to a lesser extent, QTL royalties recognized related to devices sold in prior periods (including adjustments to prior period royalty estimates, which includes the impact of the reporting by our licensees of actual royalties due) and certain QCT customer incentives.

Unearned revenues (which are considered contract liabilities) consist primarily of license fees for intellectual property with continuing performance obligations. In fiscal 2022 and fiscal 2021, we recognized revenues of $609 million and $557 million, respectively, that were recorded as unearned revenues at September 26, 2021 and September 27, 2020, respectively.

Remaining performance obligations, substantially all of which are included in unearned revenues, represent the aggregate amount of the transaction price of certain customer contracts yet to be recognized as revenues as of the end of the reporting period and exclude revenues related to (a) contracts that have an original expected duration of one year or less and (b) sales-based royalties (i.e., future royalty revenues) pursuant to our license agreements. Our remaining performance obligations are primarily comprised of certain customer contracts for which QTL received license fees upfront and certain customer contracts for which QCT received upfront fees for licensing system software. At September 25, 2022, we had $690 million of remaining performance obligations, of which $451 million, $173 million, $57 million, $5 million and $1 million is expected to be recognized as revenues for each of the subsequent five years from fiscal 2023 through 2027, respectively, and $3 million expected thereafter.

Share-based Compensation Expense. Total share-based compensation expense, related to all of our share-based awards, was comprised as follows (in millions):


	2022	2021	2020


Cost of revenues			$	61	$	47	$	34
Research and development			1,537		1,234		872
Selling, general and administrative			463		389		306
Share-based compensation expense before income taxes			2,061		1,670		1,212
Related income tax benefit			(489)		(435)		(238)
			$	1,572	$	1,235	$	974

Other Income, Costs and Expenses. In the third quarter of fiscal 2022, the General Court of the European Union issued a ruling annulling a decision made by the EC in fiscal 2018 (Note 7). As a result of the court’s decision, we recorded a $1.1 billion benefit to other income in fiscal 2022. Other expenses in fiscal 2020 consisted of $28 million in gains related to a favorable legal settlement.


Investment and Other (Expense) Income, Net (in millions)

	2022		2021		2020
Interest and dividend income	$	91	$	83	$	156

Net (losses) gains on marketable securities	(363)		427		198
Net gains on other investments	113		470		108
Net (losses) gains on deferred compensation plan assets	(141)		130		47
Impairment losses on other investments	(47)		(33)		(405)

Net (losses) gains on derivative instruments	(37)		(14)		8
Equity in net (losses) earnings of investees	(7)		13		(21)
Net gains (losses) on foreign currency transactions	19		(32)		(25)
	$	(372)	$	1,044	$	66

In fiscal 2020, in part due to the impact of COVID-19, certain of our investments were impaired and written down to their estimated fair values (a significant portion of which related to the full impairment of our investment in OneWeb, who filed for bankruptcy in the second quarter of fiscal 2020).