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1. The Company
STMicroelectronics N.V. (formerly known as SGS-THOMSON Microelectronics
N.V.) (the "Company") was formed in 1987 by the combination
of the semiconductor business of SGS Microelettronica (then
owned by Società Finanziaria Telefonica (S.T.E.T.), an
Italian corporation) and the non-military business of Thomson
Semiconducteurs (then owned by Thomson-CSF, a French corporation)
whereby each company contributed their respective semiconductor
businesses in exchange for a 50% interest in the Company. The
Company designs, develops, manufactures and markets a broad
range of semiconductor integrated circuits and discrete devices
that are used in a wide variety of microelectronic applications.
The Company is registered in The Netherlands with its statutory
domicile in Amsterdam.
At December 31, 2000, the Company was 43.77% (December 31, 1999:
44.80%) owned by STMicroelectronics Holding II B.V., and 56.23%
by the public (December 31, 1999: 55.20%).
At December 31, 1999, and at December 31, 2000, STMicroelectronics
Holding II B.V. was 100% owned by STMicroelectronics Holding
N.V.
At December 31, 1999, STMicroelectronics Holding N.V. was owned
as follows:
 50% by
FT1CI, a French holding company, whose shareholders are CEA-Industrie
(51%) and France Telecom (49%).
50% by
Finmeccanica, an Italian holding company, whose shareholders
are Istituto per la Ricostruzione Industriale S.p.a. (I.R.I.)
(54.2%), the Italian Ministry of Treasury (28.9%) and the public
(16.9%).
At December 31, 2000, STMicroelectronics Holding N.V. was owned
as follows:
50% by
FT1CI, a French holding company, whose shareholders are CEA-Industrie
(51%) and France Telecom (49%).
50% by
Finmeccanica, an Italian holding company, whose shareholders
are Istituto per la Ricostruzione Industriale S.p.a. (I.R.I.)
(5.0%), the Italian Ministry of Treasury (32.4%) and the public
(62.6%).
2. Summary of accounting policies
2.1 Principles of consolidation
The accompanying consolidated financial statements have been
prepared in accordance with accounting principles generally
accepted in the United States of America (U.S. GAAP). The Company's
consolidated financial statements include the assets, liabilities
and results of operations of its majority-owned subsidiaries.
The ownership of other interest holders is reflected as minority
interests. Intercompany balances and transactions have been
eliminated in consolidation. |
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2.2 Use of estimates
The preparation of financial statements in accordance with U.S.
GAAP requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and
accompanying notes to the financial statements. Actual results
could differ from those estimates and may affect amounts reported
in future periods.
2.3 Foreign currency
The U.S. dollar is the reporting currency for the Company because
the dollar is the currency of reference in terms of market pricing
in the world-wide semiconductor industry. Furthermore, there
is no currency in which the majority of transactions are denominated,
and revenues from external sales in U.S. dollars exceed revenues
in any other currency.
The functional currency of each subsidiary throughout the group
is generally the local currency. For consolidation purposes,
assets and liabilities of these subsidiaries are translated
at current rates of exchange at the balance sheet date. Income
and expense items are translated at the average exchange rate
for the period. The effects of translating the financial position
and results of operations from local functional currencies are
included in "other comprehensive income."
Assets, liabilities, revenue, expenses, gains or losses arising
from foreign currency transactions are recorded in the functional
currency of the recording entity at the exchange rate in effect
at the date of the transaction. At each balance sheet date,
recorded balances denominated in a currency other than the recording
entity's functional currency are translated at the exchange
rate prevailing at that date. The related exchange gains and
losses are recorded in the income statement.
The Company conducts its business on a global basis in various
major international currencies. As a result, it is exposed to
adverse movements in foreign currency exchange rates. The Company
utilizes foreign exchange forward contracts and currency options
to cover foreign currency exposure. For the forward contracts
and currency options that are considered identifiable hedges,
recognition of gains and losses is deferred until settlement
of the underlying commitments. Realized gains and losses are
recorded as other income or expense when the underlying exposure
materializes or the hedged transaction is no longer expected
to occur. The discount or premium on these forward contracts
designated as a hedge, are recorded as an asset or liability
and amortized to interest expense over the term of the contract.
For the forward contracts and currency options that are not
considered identifiable hedges, recognition of gains and losses
is recognized at each reporting period, based on the fair market
value of the forward contract. Realized gains or losses are
recorded as other income and expense.
2.4 Reclassifications
Certain prior year amounts have been reclassified to conform
with the current year presentation. |
