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 Captions

Composition of Certain Financial Statement Captions

12 Months Ended

Sep. 29, 2013

Notes to Financial Statements [Abstract]

Note 2 - Composition of Certain Financial Statement Items

Note 2. Composition of Certain Financial Statement Items



Accounts Receivable (in millions)	September 29, 2013		September 30, 2012
Trade, net of allowances for doubtful accounts of $2 and $1, respectively	$	2,066	$	1,418
Long-term contracts	27		32
Other	49		9
	$	2,142	$	1,459



Inventories (in millions)	September 29, 2013		September 30, 2012
Raw materials	$	2	$	19
Work-in-process	631		531
Finished goods	669		480
	$	1,302	$	1,030



Property, Plant and Equipment (in millions)	September 29, 2013			September 30, 2012
Land	$	212		$	203
Buildings and improvements	1,733			1,392
Computer equipment and software	1,425			1,409
Machinery and equipment	2,013			1,828
Furniture and office equipment	87			80
Leasehold improvements	218			237
Construction in progress	480			774
	6,168			5,923
Less accumulated depreciation and amortization	(3,173		)	(3,072		)
	$	2,995		$	2,851

Depreciation and amortization expense related to property, plant and equipment for fiscal 2013, 2012 and 2011 was $515 million, $427 million and $704 million, respectively. The gross book values of property under capital leases included in buildings and improvements were $18 million and $64 million at September 29, 2013 and September 30, 2012, respectively. These capital leases principally related to base station towers and buildings.

At September 29, 2013, buildings and improvements and leasehold improvements that were leased to third parties or held for lease to third parties were negligible. Future minimum rental income on facilities leased to others is expected to be negligible. At September 30, 2012, buildings and improvements and leasehold improvements with a net book value of $13 million were leased to third parties or held for lease to third parties.

Goodwill and Other Intangible Assets. The Company’s reportable segment assets do not include goodwill. The Company allocates goodwill to its reporting units for annual impairment testing purposes. Goodwill was allocable to reporting units included in the Company’s reportable and nonreportable segments, as described in Note 8, as follows (in millions):



	September 29, 2013		September 30, 2012
QCT	$	2,875	$	2,816
QTL	706		707
QWI	107		128
Nonreportable segments	288		266
	$	3,976	$	3,917

During fiscal 2012, the Company’s QMT division (a nonreportable segment) updated its business plan to focus on licensing its next generation interferometric modulator (IMOD) display technology while directly commercializing certain IMOD products. In the course of pursuing its licensing model, the Company considered various alternatives for certain property, plant and equipment. The Company performed interim and subsequent annual goodwill impairment tests in fiscal 2013 and 2012 of the QMT division, which was determined to be a reporting unit for purposes of the goodwill impairment tests, and concluded each time that the fair value of the QMT reporting unit was greater than its carrying value. The Company also assessed the recoverability of QMT’s other long-lived assets. During fiscal 2013 and 2012, as a continuation of evaluating alternatives with respect to certain long-lived assets comprising QMT asset groups, the Company revised its estimates of expected cash flows and recorded impairment charges of $158 million and $54 million, respectively, in other expenses. At September 29, 2013, the carrying values of the QMT division’s goodwill and long-lived asset groups were $133 million and $707 million, respectively.

During fiscal 2012 and 2011, the Company recorded impairment charges of $23 million and $114 million, respectively, in other expenses to write down goodwill related to its QRS division (included in the QWI segment). At September 29, 2013, $17 million of goodwill remained for the QRS division.

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



	September 29, 2013					September 30, 2012
	Gross Carrying Amount		Accumulated Amortization			Gross Carrying Amount		Accumulated Amortization
Wireless spectrum	$	19	$	(8	)	$	20	$	(3	)
Marketing-related	76		(37		)	79		(28		)
Technology-based	3,964		(1,512		)	3,960		(1,158		)
Customer-related	87		(36		)	101		(33		)
	$	4,146	$	(1,593	)	$	4,160	$	(1,222	)

All of these intangible assets are subject to amortization, other than acquired in-process research and development with a carrying value of $54 million at September 29, 2013. Amortization expense related to these intangible assets for fiscal 2013, 2012 and 2011 was $499 million, $473 million and $357 million, 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 $484 million, $444 million, $340 million, $226 million and $193 million for fiscal 2014 to 2018, respectively, and $867 million thereafter.



Other Current Liabilities (in millions)	September 29, 2013		September 30, 2012
Customer incentives and other customer-related liabilities	$	1,706	$	1,107
Other	570		616
	$	2,276	$	1,723

Assets and Liabilities Held for Sale. On August 21, 2013, the Company entered into a definitive agreement under which it agreed to sell the North and Latin American operations of its Omnitracs division to a U.S.-based private equity firm for $800 million in cash, subject to the terms and conditions of the definitive agreement. The transaction is subject to customary closing conditions, including receipt of regulatory approvals, and is expected to close in the first quarter of fiscal 2014. As a result, assets (recorded as other current assets and noncurrent assets held for sale) and liabilities (recorded as current liabilities held for sale and other noncurrent liabilities) of $139 million and $43 million, respectively, were classified as held for sale at September 29, 2013. The Company expects to present the gain on the sale, net of income taxes, as a discontinued operation upon close. However, the revenues and operating results of the North and Latin American operations of the Omnitracs division, which comprise substantially all of the Omnitracs division, were not presented as discontinued operations in any fiscal period because they were immaterial. At September 30, 2012, assets and liabilities held for sale of $1.1 billion each were comprised of the assets and liabilities of the Company’s former BWA subsidiaries (Note 10).