Instructions: Attached is the contingency footnote for the Walt Disney Company.Included in footnote is a note about a lawsuit from Beef Products.There is a statement that the company is the defendant in other cases.The Beef Products case is the only case mentioned in detail.This lawsuit was settled in 2017 as the court case was starting.No settlement details were made public. Review the Kroger balance sheet included in the Kroger financials file. Review the section of Kroger footnote 1 section regarding inventory. Review the section of Intel footnote 1 regarding plant property and equipment Submit a paper providing the following: For the Disney Company, provide a brief detail of the lawsuit. Because the Beef lawsuit is included in the footnote, what does this tell you about the company belief regarding the merit of the lawsuit? For Kroger deposits in transit: What is the account titled Store deposits in-transit (refer to footnote 1)? This is not an account you will find on the majority of company financial statements.Why does Kroger include this account?Is it odd that this account is larger than the cash balance?How do you explain this? For Kroger footnote 1: What cost flow assumption method does Kroger use for food? Does this match the actual flow of goods through the stores?What is the explanation for this? For the Intel footnote 1: what do you believe is the motivation for the change described in this note? This changed provided a significant change to the company net income; since depreciation is a non cash expense, do you believe this makes a significant change in the valuation of the company? Disney Contingencies: 14 Commitments and Contingencies Commitments The Company has various contractual commitments for broadcast rights for sports, feature films and other programming, totaling approximately $51.0 billion, including approximately $0.4 billion for available programming as ofOctober1, 2016, and approximately $48.7 billion related to sports programming rights, primarily college football (including bowl games and the College Football Playoff) and basketball, NBA, NFL, MLB, US Open Tennis, various soccer rights, the Wimbledon Championships and the Masters golf tournament. The Company has entered into operating leases for various real estate and equipment needs, including retail outlets and distribution centers for consumer products, broadcast equipment and office space for general and administrative purposes. Rental expense for operating leases during fiscal years2016,2015and2014, including common-area maintenance and contingent rentals, was$847 million,$859 millionand$883 million, respectively. The Company also has contractual commitments for two new cruise ships, creative talent and employment agreements and unrecognized tax benefits. Creative talent and employment agreements include obligations to actors, producers, sports, television and radio personalities and executives. Contractual commitments for broadcast programming rights, future minimum lease payments under non-cancelable operating leases, cruise ships, creative talent and other commitments totaled$60.8 billionatOctober1, 2016, payable as follows: Broadcast Programming Operating Leases Other Total 2017 $ 6,119 $ 477 $ 1,880 $ 8,476 2018 6,015 376 1,006 7,397 2019 6,221 329 502 7,052 2020 6,416 278 486 7,180 2021 6,314 227 206 6,747 Thereafter 19,925 1,419 2,567 23,911 $ 51,010 $ 3,106 $ 6,647 $ 60,763 Certain contractual commitments, principally broadcast programming rights and operating leases, have payments that are variable based primarily on revenues and are not included in the table above. The Company has non-cancelable capital leases, primarily for land and broadcast equipment, which had gross carrying values of$464 millionand$469 millionatOctober1, 2016andOctober3, 2015, respectively. Accumulated amortization related to these capital leases totaled$216 millionand$196 millionatOctober1, 2016andOctober3, 2015, respectively. Future payments under these leases as ofOctober1, 2016are as follows: 2017 $ 35 2018 24 2019 17 2020 15 2021 15 Thereafter 495 Total minimum obligations 601 Less amount representing interest (407 ) Present value of net minimum obligations 194 Less current portion (20 ) Long-term portion $ 174 Contractual Guarantees The Company has guaranteed bond issuances by the Anaheim Public Authority thatwere usedby the City of Anaheim to finance construction of infrastructure and a public parking facility adjacent to the Disneyland Resort. Revenues from sales, occupancy and property taxes from the Disneyland Resort and non-Disney hotelsare usedby the City of Anaheim to repay the bonds. In the event of a debt service shortfall, the Company will be responsible to fund the shortfall. As of October1, 2016, the remaining debt service obligation guaranteed by the Company was $316 million, of which $51 million was principal. To the extent that tax revenues exceed the debt service payments in subsequent periods, the Companywould be reimbursedfor any previously funded shortfalls. To date, tax revenues have exceeded the debt service payments for the Anaheim bonds. Legal Matters Beef Products, Inc. v. American Broadcasting Companies, Inc. On September 13, 2012, plaintiffs filed an action in South Dakota state court against certain subsidiaries and employees of the Company and others, asserting claims for defamation arising from alleged false statements and implications, statutory and common law product disparagement, and tortious interference with existing and prospective business relationships. The claims arise out of ABC News reports published in March and April 2012 about a product, Lean Finely Textured Beef, that was included in ground beef and hamburger meat. Plaintiffs' complaint sought actual and consequential damages in excess of $400 million (which in March 2016 they asserted could be as much as $1.9 billion), statutory damages (including treble damages) pursuant to South Dakota's Agricultural Food Products Disparagement Act, and punitive damages. Trial is set for June 2017. At this time, the Company is not able to predict the ultimate outcome of this matter, nor can it estimate the range of possible loss. The Company, together with, in some instances, certain of its directors and officers, is a defendant or codefendant in various other legal actions involving copyright, breach of contract and various other claims incident to the conduct of its businesses. Management does not believe that the Company has incurred a probable material lossby reason ofany of the above actions. Long-Term Receivables and the Allowance for Credit Losses The Company has accounts receivable with original maturities greater than one year related to the sale of television program rights and vacation ownership units. Allowances for credit lossesare establishedagainst these receivables as necessary. The Company estimates the allowance for credit losses related to receivables from the sale of television programs based upon a number of factors, including historical experience and the financial condition of individual companies with which we do business. The balance of television program sales receivables recorded in other non-current assets, net of an immaterial allowance for credit losses, was $0.9 billion as ofOctober1, 2016. Fiscal2016activity related to the allowance for credit losses was not material. The Company estimates the allowance for credit losses related to receivables from sales of its vacation ownership units based primarily on historical collection experience. Estimates of uncollectible amounts also consider the economic environment and the age of receivables. The balance of mortgage receivables recorded in other non-current assets, net of a related allowancefor credit losses of approximately 4%, was $0.7 billion as ofOctober1, 2016. Fiscal2016activity related to the allowance for credit losses was not material. Kroger Footnote: 1.ACCOUNTINGPOLICIES The following is a summary of the significant accounting policies followed in preparing these financial statements. Description of Business, Basis of Presentation and Principles of Consolidation The Kroger Co. (the "Company")was founded in 1883 and incorporated in 1902.As of January 28, 2017, the Company was one of the largest retailers in the world based on annual sales.The Company also manufactures and processes food for sale by its supermarkets.The accompanying financial statements include the consolidated accounts of the Company, itswholly-ownedsubsidiaries and the variable interest entities in which the Company is the primary beneficiary.Intercompany transactions and balanceshave been eliminated. On June 25, 2015, the Company's Board of Directors approved a two-for-one stock split of the Company's common shares in the form of a 100% stock dividend, which was effective July 13, 2015. All share and pershareamounts in the Company's Consolidated Financial Statements and related notes have been retroactively adjusted to reflect the stock split for all periods presented. Refer to Note 17 for a description of changes to the Consolidated Statement of Operations and Consolidated Statement of Cash Flows for a recently adopted accounting standard regarding the presentation of employee share-based compensation payments. Fiscal Year The Company's fiscal year ends on the Saturday nearest January31.The last three fiscal years consist of the 52-week periods ended January 28, 2017, January 30, 2016 and January 31, 2015. Pervasiveness of Estimates The preparation of financial statements in conformity with generally accepted accounting principles ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities.Disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of consolidated revenues and expenses during the reporting period is also required.Actual results could differ from those estimates. Cash, Temporary Cash Investments and Book Overdrafts Cash and temporary cash investments represent store cash and short-term investments with original maturities of less than three months.Book overdrafts are included in "Trade accounts payable" and "Accrued salaries and wages" in the Consolidated Balance Sheets. Deposits In-Transit Deposits in-transit generally represent funds deposited to the Company's bank accounts at the end of the year related to sales, a majority of which were paid for with debit cards, credit cards and checks, to which the Company does not have immediate access but settle within a few days of the sales transaction. Inventories Inventories are stated at the lower of cost (principally on alast-in, first-out "LIFO" basis) or market.In total, approximately 89% of inventories in 2016 and 95% of inventories in 2015 were valued using the LIFO method.Cost for the balance of the inventories, including substantially all fuel inventories, was determined using the first-in, first-out ("FIFO") method.Replacement cost was higher than the carrying amount by $1,291 at January 28, 2017 and $1,272 at January 30, 2016.The Company follows the Link-Chain, Dollar-Value LIFO method for purposes of calculating its LIFO charge or credit. The item-cost method of accounting to determine inventory cost before the LIFO adjustmentis followedfor substantially all store inventories at the Company's supermarket divisions.This method involves counting each item in inventory, assigning costs to each of these items based on the actual purchase costs (net of vendor allowances and cash discounts) of each item and recording the cost of items sold.The item-cost method of accounting allows for more accurate reporting of periodic inventory balances and enables managementto more precisely manageinventory.In addition, substantially all of the Company's inventory consists of finished goods andis recordedat actual purchase costs (net of vendor allowances and cash discounts). The Company evaluates inventory shortages throughout the year based on actual physical counts in its facilities.Allowances for inventory shortagesare recordedbased on the results of these counts to provide for estimated shortages as of the financial statement date. Property, Plant and Equipment Property, plant and equipmentare recordedat cost or, in the case of assets acquired in a business combination, at fair value.Depreciation and amortization expense, which includes the depreciation of assets recorded under capital leases,is computedprincipally using the straight-line method over the estimated useful lives of individual assets.Buildings and land improvements are depreciated based on lives varying from 10 to 40 years.All new purchases of store equipmentare assignedlives varying from three to nine years.Leasehold improvements are amortized over the shorter of the lease term to which they relate, which generally varies from four to 25 years, or the useful life of the asset.Food production plant and distribution center equipmentis depreciatedover lives varying from three to 15 years.Information technology assetsare generally depreciatedover five years.Depreciation and amortization expense was $2,340 in 2016, $2,089 in 2015 and $1,948 in 2014. Interest costs on significant projects constructed for the Company's own useare capitalizedas part of the costs of the newly constructed facilities.Upon retirement or disposal of assets, the cost and related accumulated depreciation and amortizationare removedfrom the balance sheet and any gain or loss is reflected in net earnings.Refer to Note 4 for further information regarding the Company's property, plant and equipment. Deferred Rent The Company recognizes rent holidays, including thetime periodduring which the Company has access to the property for construction of buildings or improvements and escalating rent provisions on a straight-line basis over the term of the lease.The deferred amount is included in "Other current liabilities" and "Other long-term liabilities" on the Company's Consolidated Balance Sheets. Goodwill The Company reviews goodwill for impairment during the fourth quarter of each year,and alsoupon the occurrence of a triggering event.The Company performs reviews of each of its operating divisions and variable interest entities (collectively, "reporting units") that have goodwill balances.Generally, fair value is determined using a multiple of earnings, or discounted projected future cash flows, andis comparedto the carrying value of a reporting unit for purposes of identifying potential impairment.Projected future cash flowsare basedon management's knowledge of the current operating environment and expectations for the future.If potential for impairmentis identified, the fair value of a reporting unit is measured against the fair value of its underlying assets and liabilities, excluding goodwill, to estimate an implied fair value of the reporting unit's goodwill.Goodwill impairmentis recognizedfor any excess of the carrying value of the reporting unit's goodwill over the implied fair value.Results of the goodwill impairment reviews performed during 2016, 2015 and 2014are summarizedin Note 3. Impairment of Long-Lived Assets The Company monitors the carrying value of long-lived assets for potential impairment each quarter based on whether certain triggering events have occurred.These events include current period losses combined with a history of losses or a projection of continuing losses or a significant decrease in the market value of an asset.When atriggering event occurs, an impairment calculationis performed, comparing projected undiscounted future cash flows, utilizing current cash flow information and expected growth rates related to specific stores, to the carrying value for those stores.If the Company identifies impairment for long-lived assets to beheldand used, the Company compares the assets' current carrying value to the assets' fair value.Fair valueis basedon current market values or discounted future cash flows.The Company records impairment when the carrying value exceeds fair market value.With respect to owned property and equipment held for disposal, the value of the property and equipmentis adjustedto reflect recoverable values based on previous efforts to dispose of similar assets and current economic conditions.Impairmentis recognizedfor the excess of the carrying value over the estimated fair market value, reduced by estimated direct costs of disposal.The Company recorded asset impairments in the normal course of business totaling $26, $46 and $37 in 2016, 2015 and 2014, respectively.Costs to reduce the carrying value of long-lived assets for each of the years presented have been included in the Consolidated Statements of Operations as "Operating, general and administrative" expense. Store Closing Costs The Company provides for closed store liabilities relating to the present value of the estimated remaining non-cancellable lease payments after the closing date, net of estimated subtenant income.The Company estimates the net lease liabilities using a discount rate to calculate the present value of the remaining net rent payments on closed stores.The closed store lease liabilities usuallyare paidover the lease terms associated with the closed stores, which generally have remaining terms ranging from one to 20 years.Adjustments to closed store liabilities primarily relate to changes in subtenant income and actual exit costs differing from original estimates.Adjustmentsare madefor changes in estimates in the period in which the change becomes known.Store closing liabilitiesare reviewedquarterly to ensure that any accrued amount that is not a sufficient estimate of future costs is adjusted to income in the proper period. Owned stores held for disposalare reducedto their estimated net realizable value.Costs to reduce the carrying values of property, equipment and leasehold improvementsare accounted forin accordance with the Company's policy on impairment of long-lived assets.Inventory write-downs, if any, in connection with store closings,are classifiedin the Consolidated Statements of Operations as "Merchandise costs."Costs to transfer inventory and equipment from closed storesare expensedas incurred. The current portion of the future lease obligations of stores is included in "Other current liabilities," and the long-term portion is included in "Other long-term liabilities" in the Consolidated Balance Sheets. Interest Rate Risk Management The Company uses derivative instruments primarily to manage its exposure to changes in interest rates.The Company's current program relative to interest rate protection and the methods by which the Company accounts for its derivative instrumentsare describedin Note 7. Benefit Plans and Multi-Employer Pension Plans The Company recognizes the funded status of its retirement plans on the Consolidated Balance Sheets. Actuarial gains or losses, prior service costs or credits and transition obligations thathave not yet been recognizedas part of net periodic benefit cost are required to be recorded as a component of Accumulated Other Comprehensive Income ("AOCI").All plansare measuredas of the Company's fiscal year end. The determination of the obligation and expense for Company-sponsored pension plans and other post-retirement benefits is dependent on the selection of assumptions used by actuaries and the Company in calculating those amounts.Those assumptionsare describedin Note 15 and include, among others, the discount rate, the expected long-term rate of return on plan assets, mortality and the rates of increase in compensation and health care costs.Actual results that differ from the assumptionsare accumulatedand amortized over future periods and, therefore, generally affect the recognized expense and recorded obligation in future periods.While the Company believes that the assumptions are appropriate, significant differences in actual experience or significant changes in assumptions may materially affect the pension and other post-retirement obligations and future expense. The Company also participates in various multi-employer plans for substantially all union employees.Pension expense for these plansis recognizedas contributions are funded or when commitments are probable and reasonably estimable, in accordance with GAAP.Refer to Note 16 for additional information regarding the Company's participation in these various multi-employer pension plans. The Company administers andmakes contributionsto the employee 401(k)retirement savings accounts.Contributions to the employee 401(k)retirement savings accountsare expensedwhen contributed.Refer to Note 15 for additional information regarding the Company's benefit plans. Share Based Compensation The Company accounts for stock options under fair value recognition provisions . Under this method, the Company recognizes compensation expense for all share-based payments granted.The Company recognizes share-based compensation expense, net of an estimated forfeiture rate, over the requisite service period of the award.In addition, the Company records expense for restricted stock awards in an amount equal to the fair market value of the underlying stock on the grant date of the award, over the period the awards lapse. Excess tax benefits related to share-based paymentsare recognizedin the provision for income taxes. Refer to Note 12 for additional information regarding the Company's stock based compensation. Deferred Income Taxes Deferred income taxesare recordedto reflect the tax consequences of differences between the tax basis of assets and liabilities and their financial reporting basis.Refer to Note 5 for the types of differences that give rise to significant portions of deferred income tax assets and liabilities.Deferred income taxesare classifiedas a net current or noncurrent asset or liability based on the classification of the related asset or liability for financial reporting purposes.A deferred tax asset or liability thatis not relatedto an asset or liability for financial reporting is classified according to the expected reversal date. Uncertain Tax Positions The Company reviews the tax positions taken orexpected to be takenon tax returns to determine whether and to what extent a benefit can be recognized in its consolidated financial statements.Refer to Note 5for the amount ofunrecognized tax benefits and other related disclosures related to uncertain tax positions. Various taxing authorities periodically audit the Company's income tax returns.These audits include questions regarding the Company's tax filing positions, including the timing and amount of deductions and the allocation of income to various tax jurisdictions.Inevaluatingthe exposures connected with these various tax filing positions, including state and local taxes, the Company records allowances for probable exposures.A number of years may lapse before a particular matter, for which an allowancehas been established, is audited and fully resolved.As of January 28, 2017, the Internal Revenue Service had concluded its examination of the Company's 2012 and 2013 federal tax returns. The assessment of the Company's tax position relies on the judgment of management to estimate the exposures associated with the Company's various filing positions. Self-Insurance Costs The Company is primarily self-insured for costs related to workers' compensation and general liability claims.Liabilities are actuarially determined and are recognized based on claims filed and an estimate of claims incurred but not reported.The liabilities for workers' compensation claimsare accounted foron a present value basis.The Company has purchased stop-loss coverage to limit its exposure to any significant exposure on a per claim basis.The Companyis insuredfor covered costs in excess of these per claim limits. The following table summarizes the changes in the Company's self-insurance liability through January 28, 2017. 2016 2015 2014 Beginning balance $ 639 $ 599 $ 569 Expense 263 234 246 Claim payments (220) (225) (216) Assumed from mergers 31 Ending balance 682 639 599 Less: Current portion (229) (223) (213) Long-term portion $ 453 $ 416 $ 386 The current portion of the self-insured liability is included in "Other current liabilities," and the long-term portion is included in "Other long-term liabilities" in the Consolidated Balance Sheets. The Company maintains surety bonds related to self-insured workers' compensation claims.These bondsare requiredby most states in which the Company is self-insured for workers' compensation and are placed with third-party insurance providers to insure payment of the Company's obligations in the event the Company is unable to meet its claim payment obligations up to its self-insured retention levels.These bonds do not represent liabilities of the Company, as the Company has recorded reserves for the claim costs. The Company is similarly self-insured for property-related losses.The Company maintains stop loss coverage to limit its property loss exposures including coverage for earthquake, wind, flood and other catastrophic events. Revenue Recognition Revenues from the sale of productsare recognizedat the point of sale.Discounts provided to customers by the Company at the time of sale, including those provided in connection with loyalty cards,are recognizedas a reduction in sales as the products are sold.Discounts provided by vendors, usually in the form of paper coupons,are not recognizedas a reduction in sales provided the coupons are redeemable at any retailer that accepts coupons.The Company recordsa receivable from the vendor for the difference in sales price and cashreceived.Pharmacy sales are recorded when product is provided to the customer.Sales taxesare recordedas other accrued liabilities and not as a component of sales.The Company does not recognize a sale when it sells its own gift cards and gift certificates.Rather, it records a deferred liability equal to the amount received.A saleis then recognizedwhen the gift card or gift certificate is redeemed to purchase the Company's products.In 2016, the Company began recognizing gift card and gift certificate breakage under the proportional method, where recognition of breakage incomeis basedupon the historical run-off rate of unredeemed gift cards and gift certificates.Prior to 2016, gift card and gift certificate breakagewas recognizedunder the remote method, where breakage income is recognized when redemption is unlikely to occur and there is no legal obligation to remit the value of the unredeemed gift cards or gift certificates.The amount of breakage was not material for 2016, 2015 and 2014. Merchandise Costs The "Merchandise costs" line item of the Consolidated Statements of Operations includes product costs, net of discounts and allowances; advertising costs (see separate discussion below); inbound freight charges; warehousing costs, including receiving and inspection costs; transportation costs; and food production and operational costs.Warehousing, transportation and manufacturing management salaries are also included in the "Merchandise costs" line item; however, purchasing management salaries and administration costs are included in the "Operating, general and administrative" line item along with most of the Company's other managerial and administrative costs.Rent expense and depreciation and amortization expenseare shownseparately in the Consolidated Statements of Operations. Warehousing and transportation costs include distribution center direct wages, transportation direct wages, repairs and maintenance, utilities, inbound freight and, where applicable, third party warehouse management fees.These costsare recognizedin the periods the related expenses are incurred. The Company believes the classification of costs included in merchandise costs could vary widely throughout the industry.The Company's approach is to include in the "Merchandise costs" line item the direct, net costs of acquiring products and making them available to customers in its stores.The Company believes this approach most accurately presents the actual costs of products sold. The Company recognizes all vendor allowances as a reduction in merchandise costs when the related productis sold.When possible, vendor allowancesare appliedto the related product cost by item and, therefore, reduce the carrying value of inventory by item.When the itemsare sold, the vendor allowance is recognized.When it is not possible, due to systems constraints, to allocate vendor allowances to the product by item, vendor allowancesare recognizedas a reduction in merchandise costs based on inventory turns and, therefore, recognized as the product is sold. Advertising Costs TheCompany'sadvertising costs are recognized in the periods the related expenses are incurred and are included in the "Merchandise costs" line item of the Consolidated Statements of Operations.The Company's pre-tax advertising costs totaled $717 in 2016, $679 in 2015 and $648 in 2014.The Company does not record vendor allowances for co-operative advertising as a reduction of advertising expense. Consolidated Statements of Cash Flows For purposes of the Consolidated Statements of Cash Flows, the Company considers allhighly liquiddebt instruments purchased with an original maturity of three months or less to be temporary cash investments. Segments The Company operates supermarkets, multi-department stores, jewelry stores, and convenience stores throughout the United States.The Company's retail operations, which represent over 98% of the Company's consolidated sales and EBITDA, are its only reportable segment.The Company's operating divisionshave been aggregatedinto one reportable segment due to the operating divisions having similar economic characteristics with similar long-term financial performance.In addition, the Company's operating divisions offer customers similar products, have similar distribution methods, operate in similar regulatory environments, purchase the majority of the merchandise for retail sale from similar (and in many cases identical) vendors on a coordinated basis from a centralized location, serve similar types of customers, and are allocated capital from a centralized location.Operating divisionsare organizedprimarily on a geographical basis so that the operating division management team can be responsive to local needs of the operating division and can execute company strategic plans and initiatives throughout the locations in the operating division.The geographical separation is the primary differentiation between these operating divisions.The Company's geographic basis of organization reflects the manner in which the businessis managedand how the Company's Chief Executive Officer, who acts as the Company's chief operating decision maker, assesses performance internally.All of the Company's operations are domestic. The following table presents sales revenue by type of product for 2016, 2015 and 2014. 2016 2015 2014 Amount %oftotal Amount %oftotal Amount %oftotal Non Perishable(1) $ 60,220 52.2 % $ 57,187 52.1 % $ 54,392 50.1 % Perishable(2) 27,666 24.0 % 25,726 23.4 % 24,178 22.3 % Fuel 13,979 12.1 % 14,802 13.5 % 18,850 17.4 % Pharmacy 10,432 9.0 % 9,778 8.9 % 9,032 8.3 % Other(3) 3,040 2.7 % 2,337 2.1 % 2,013 1.9 % Total Sales and other revenue $ 115,337 100 % $ 109,830 100 % $ 108,465 100 % (1) Consists primarily of grocery, general merchandise, health and beauty care and natural foods. (2) Consists primarily of produce, floral, meat, seafood, deli,bakeryand fresh prepared. (3) Consists primarily of sales related to jewelry stores, food production plants to outside customers, data analytic services, variable interest entities, specialty pharmacy, in-store health clinics, digital coupon services and online sales by Vitacost.com. Intel PPE: INTEL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1: Basis of Presentation We have a 52- or 53-week fiscal year that ends on the last Saturday in December. Fiscal year 2016 was a 53-week fiscal year, and the first quarter of 2016 was a 14-week quarter. Fiscal years 2015 and 2014 were 52-week years. Our consolidated financial statements include the accounts of Intel Corporation (Intel) and our subsidiaries. We have eliminated intercompany accounts and transactions. We have reclassified certain prior period amounts to conform to current period presentation. Use of Estimates The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles (U.S. GAAP) requires us to make estimates and judgments that affect the amounts reported in our consolidated financial statements and the accompanying notes. The actual results that we experience may differ materially from our estimates. During our 2015 annual assessment of the useful lives of our property, plant and equipment, we determined that the estimated useful lives of machinery and equipment in our wafer fabrication facilities should be increased from 4 to 5 years based on the lengthening of the process technology cadence resulting in longer node transitions on both 14 nanometer (nm) and 10nm products.We have also increased the re-use of machinery and tools across each generation of process technology. This change in estimatewas appliedprospectively, effective at the beginning of 2016. During 2016, this change increased our operating income by approximately $1.3 billion, our net income by approximately $950million,and our diluted earnings per share by approximately $0.19