We enter into lease agreements for a variety of business purposes, including office and manufacturing space, office and manufacturing equipment and computer
equipment. A portion of these are noncancellable operating leases. See Note 11 for our operating lease obligations .
Revenue is recognized for wafer and other product sales when title transfers, the risks and rewards of ownership have been transferred to the customer, the fee
is fixed or determinable and collection of the related receivable is reasonably assured, which is generally at the time of shipment for non-consignment orders. In the case of consignment orders, title passes when the customer pulls the product from
the assigned storage facility or, if the customer does not pull the product within a contractually stated period of time (generally 6090 days), at the end of that period, or when the customer otherwise agrees to take title to the product. Our
wafers are generally made to customer specifications, and we conduct rigorous quality control and testing procedures to ensure that the finished wafers meet the customers specifications before the product is shipped. We consider international
shipping term definitions in our determination of when title passes. We also defer revenue when pricing is not fixed or determinable or other revenue recognition criteria are not met.
Derivative Financial Instruments and Hedging Activities
To mitigate financial market risks of fluctuations in foreign currency exchange rates, we utilize currency forward contracts. We do not use derivative
financial instruments for speculative or trading purposes. All derivative instruments are recorded on the combined balance sheet at fair value. We have not designated any derivatives as hedge accounting. Derivatives not designated as hedge
accounting and used to hedge foreign-currency-denominated balance sheet items are reported directly in earnings along with offsetting transaction gains and losses on the items being hedged. See Note 10.
Translation of Foreign Currencies
We determine the
functional currency of each subsidiary based on a number of factors, including the predominant currency for the subsidiarys sales and expenditures and the subsidiarys borrowings. When a subsidiarys local currency is considered its
functional currency, we translate its financial statements to U.S. dollars as follows:
||Assets and liabilities using exchange rates in effect at the balance sheet date; and |
||Statement of operations accounts at average exchange rates for the period. |
Adjustments from the translation
process are presented in accumulated other comprehensive (loss) income in equity.
SunEdison files consolidated income tax returns that include us. For purposes of these combined financial statements, our taxes are computed and reported
using a separate return method, or as though we filed a separate return for jurisdictions in which its operations are included in consolidated returns filed by SunEdison. We also record income taxes for jurisdictions in which any of our
consolidated subsidiaries files separate returns. Income taxes as presented herein allocate current and deferred income taxes of SunEdison to us in a manner that is systematic, rational and consistent with the asset and liability method in
accordance with FASB Accounting Standards Codification 740 (ASC 740), Accounting for Income Taxes. The sum of the amounts allocated to the carve-out tax provisions may not equal the historical consolidated
provision. Under the separate return method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases and operating loss carry forwards.