QUALCOMM INC/DE 10-K

Item 9A. Controls and Procedures Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures Under the supervision and with the participation of our management, including our principal executive officer and our principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such terms are defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the Exchange Act). Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Annual Report. Management’s Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Under the supervision and with the participation of our management, including our principal executive officer and our principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under this framework, our management concluded that our internal control over financial reporting was effective as of September 24, 2023. PricewaterhouseCoopers LLP, the independent registered public accounting firm that audited our consolidated financial statements included in this Annual Report, has also audited the effectiveness of our internal control over financial reporting as of September 24, 2023, as stated in its report which appears on pages F-1 through F-2 in this Annual Report. Inherent Limitations over Internal Controls Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that: i. pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; ii. provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and iii. provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the consolidated financial statements. Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations, including the possibility of human error and circumvention by collusion or overriding of controls. Accordingly, even an effective internal control system may not prevent or detect material misstatements on a timely basis. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate. Changes in Internal Control over Financial Reporting There were no changes in our internal control over financial reporting during the fourth quarter of fiscal 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Item 9B. Other Information During the quarter ended September 24, 2023, none of our directors or officers (as defined in Rule 16a-1(f) of the Exchange Act) adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408 of Regulation S-K. Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections Not applicable. 49 PART III Item 10. Directors, Executive Officers and Corporate Governance The information required by this item regarding directors is incorporated by reference to our 2024 Proxy Statement to be filed with the SEC in connection with our 2024 Annual Meeting of Stockholders (2024 Proxy Statement) in “Proposal 1: Election of Directors” under the heading “Nominees for Election.” Certain information required by this item regarding executive officers is set forth in Item 1 of Part I of this Annual Report under the heading “Information about our Executive Officers.” The information required by this item regarding corporate governance is incorporated by reference to our 2024 Proxy Statement in the section titled “Corporate Governance” under the headings “Code of Ethics and Corporate Governance Principles and Practices” and “Board Meetings, Committees and Attendance.” Item 11. Executive Compensation The information required by this item is incorporated by reference to our 2024 Proxy Statement in the section titled “Executive Compensation and Related Information” under the heading “Compensation Discussion and Analysis,” in the sections titled “HR and Compensation Committee Report,” “Compensation Tables and Narrative Disclosures” and “Director Compensation,” and in the section titled “Stock Ownership of Certain Beneficial Owners and Management” under the heading “Compensation Committee Interlocks and Insider Participation.” Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The information required by this item is incorporated by reference to our 2024 Proxy Statement in the section titled “Stock Ownership of Certain Beneficial Owners and Management” and in “Proposal 4” under the heading “Equity Compensation Plan Information.” Item 13. Certain Relationships and Related Transactions, and Director Independence The information required by this item is incorporated by reference to our 2024 Proxy Statement in the section titled “Certain Relationships and Related-Person Transactions” and in the section titled “Corporate Governance” under the headings “Director Independence” and “Board Meetings, Committees and Attendance.” Item 14. Principal Accounting Fees and Services The information required by this item is incorporated by reference to our 2024 Proxy Statement in “Proposal 2: Ratification of Selection of Independent Public Accountants.” PART IV Item 15. Exhibits and Financial Statement Schedules The following documents are filed as part of this report: (a) Financial Statements: Page Number (1) Report of Independent Registered Public Accounting Firm (PCAOB ID: 238 ) F-1 Consolidated Balance Sheets at September 24, 2023 and September 25, 2022 F- 3 Consolidated Statements of Operations for Fiscal 2023, 2022 and 2021 F- 4 Consolidated Statements of Comprehensive Income for Fiscal 2023, 2022 and 2021 F- 5 Consolidated Statements of Cash Flows for Fiscal 2023, 2022 and 2021 F- 6 Consolidated Statements of Stockholders’ Equity for Fiscal 2023, 2022 and 2021 F- 7 Notes to Consolidated Financial Statements F- 8 (2) Schedule II - Valuation and Qualifying Accounts for Fiscal 2023, 2022 and 2021 S-1 Financial statement schedules other than those listed above have been omitted because they are either not required, not applicable or the information is otherwise included in the notes to the consolidated financial statements. 50 (b) Exhibits Exhibit Number Exhibit Description Form Date of First Filing Exhibit Number Filed Herewith 2.1 Agreement and Plan of Merger, dated as of October 4, 2021, by and among QUALCOMM Incorporated, SSW HoldCo LP, SSW Merger Sub Corp and Veoneer, Inc. (1) 8-K 10/4/2021 2.1 3.1 Amended and Restated Certificate of Incorporation . 8-K 4/20/2018 3.1 3.2 Amended and Restated Bylaws. 8-K 7/21/2023 3.2 4.1 Indenture, dated May 20, 2015, between the Company and U.S. Bank Trust Company, National Association (as successor in interest to U.S. Bank, National Association), as trustee. 8-K 5/21/2015 4.1 4.2 Officers’ Certificate, dated May 20, 2015, for the Floating Rate Notes due 2018, the Floating Rate Notes due 2020, the 1.400% Notes due 2018, the 2.250% Notes due 2020, the 3.000% Notes due 2022, the 3.450% Notes due 2025, the 4.650% Notes due 2035 and the 4.800% Notes due 2045. 8-K 5/21/2015 4.2 4.3 Form of 3.450% Notes due 2025. 8-K 5/21/2015 4.8 4.4 Form of 4.650% Notes due 2035. 8-K 5/21/2015 4.9 4.5 Form of 4.800% Notes due 2045. 8-K 5/21/2015 4.10 4.6 Officers’ Certificate, dated May 26, 2017, for the Floating Rate Notes due 2019, the Floating Rate Notes due 2020, the Floating Rate Notes due 2023, the 1.850% Notes due 2019, the 2.100% Notes due 2020, the 2.600% Notes due 2023, the 2.900% Notes due 2024, the 3.250% Notes due 2027 and the 4.300% Notes due 2047. 8-K 5/31/2017 4.2 4.7 Form of 2.900% Notes due 2024. 8-K 5/31/2017 4.9 4.8 Form of 3.250% Notes due 2027. 8-K 5/31/2017 4.10 4.9 Form of 4.300% Notes due 2047. 8-K 5/31/2017 4.11 4.10 Officers’ Certificate, dated May 8, 2020, for the 2.150% Notes due 2030 and the 3.250% Notes due 2050. 8-K 5/11/2020 4.2 4.11 Form of 2.150% Notes due 2030. 8-K 5/11/2020 4.3 4.12 Form of 3.250% Notes due 2050. 8-K 5/11/2020 4.4 4.13 Officers’ Certificate, dated August 14, 2020, for the 1.300% Notes due 2028 and the 1.650% Notes due 2032. 8-K 8/18/2020 4.2 4.14 Form of 1.300% Rule 144A Global Notes due 2028. 8-K 8/18/2020 4.3 4.15 Form of 1.650% Rule 144A Global Notes due 2032. 8-K 8/18/2020 4.5 4.16 Officers’ Certificate, dated January 6, 2021, for the 1.300% Notes due 2028 and the 1.650% Notes due 2032. 10-Q 2/3/2021 4.23 4.17 Form of 1.300% Notes due 2028. 10-Q 2/3/2021 4.24 4.18 Form of 1.650% Notes due 2032. 10-Q 2/3/2021 4.25 4.19 Officers’ Certificate, dated May 9, 2022, for the 4.250% Notes due 2032 and the 4.500% Notes due 2052. 8-K 5/9/2022 4.2 4.20 Form of 4.250% Notes due 2032. 8-K 5/9/2022 4.3 4.21 Form of 4.500% Notes due 2052. 8-K 5/9/2022 4.4 51 Exhibit Number Exhibit Description Form Date of First Filing Exhibit Number Filed Herewith 4.22 Officers’ Certificate, dated November 9, 2022, for the 5.400% Notes due 2033 and the 6.000% Notes due 2053. 8-K 11/9/2022 4.2 4.23 Form of 5.400% Notes due 2033. 8-K 11/9/2022 4.3 4.24 Form of 6.000% Notes due 2053. 8-K 11/9/2022 4.4 4.25 Description of registrant’s securities. 10-K 11/6/2019 4.15 10.1 Credit Agreement, dated as of December 8, 2020, among QUALCOMM Incorporated, the lenders party thereto, the letter of credit issuers party thereto and Bank of America, N.A., as administrative agent, swing line lender and a letter of credit issuer (as amended by the LIBOR Transition Amendment dated as of December 21, 2021 and as further amended by Amendment No. 2 dated as of March 10, 2023). 10-Q 5/3/2023 10.1 10.2 Form of Indemnity Agreement between the Company and its directors and officers. (2) 10-K 11/4/2015 10.1 10.3 Amended and Restated 2016 Long-Term Incentive Plan. (2) 10-Q 4/29/2020 10.7 10.4 Amended and Restated QUALCOMM Incorporated 2001 Employee Stock Purchase Plan, as amended. (2) 10-Q 4/25/2018 10.62 10.5 QUALCOMM Incorporated 2023 Long-Term Incentive Plan . (2) 10-Q 05/3/2023 10.26 10.6 Form of Qualcomm Incorporated 2016 Long-Term Incentive Plan Executive Performance Stock Unit Award Grant Notice and Executive Performance Stock Unit Award Agreement (2020 Form). (2) 10-K 11/4/2020 10.21 10.7 Form of Qualcomm Incorporated 2016 Long-Term Incentive Plan Executive Restricted Stock Unit Grant Notice and Executive Restricted Stock Unit Agreement (2020 Form). (2) 10-Q 2/3/2021 10.20 10.8 Form of Qualcomm Incorporated 2016 Long-Term Incentive Plan Executive Performance Stock Unit Award Grant Notices and Executive Performance Stock Unit Award Agreement (2021 Form). (2) 10-K 11/3/2021 10.22 10.9 Form of Qualcomm Incorporated 2016 Long-Term Incentive Plan Executive Restricted Stock Unit Award Grant Notice and Executive Restricted Stock Unit Award Agreement (2021 Form). (2) 10-K 11/3/2021 10.23 10.10 Form of Qualcomm Incorporated 2016 Long-Term Incentive Plan Executive Performance Stock Unit Award Grant Notice and Executive Performance Stock Unit Award Agreement (2022 Form). (2) 10-Q 2/2/2023 10.23 10.11 Form of Qualcomm Incorporated 2016 Long-Term Incentive Plan Executive Restricted Stock Unit Award Grant Notice and Executive Restricted Stock Unit Award Agreement (2022 Form). (2) 10-Q 2/2/2023 10.24 10.12 Form of 20 23 Annual Cash Incentive Plan Performance Unit Agreement . (2) 10-Q 2/2/2023 10.25 10.13 Qualcomm Incorporated Executive Officer Change in Control Severance Plan (as amended and restated). (2) 10-Q 5/3/2023 10.14 10.14 Qualcomm Incorporated Executive Officer Severance Plan (as amended and restated). (2) 10-Q 5/3/2023 10.15 10.15 Qualcomm Incorporated Non-Executive Officer Change in Control Severance Plan (as amended and restated). 10-Q 5/3/2023 10.16 10.16 QUALCOMM Incorporated Non-Qualified Deferred Compensation Plan, as amended and restated effective January 1, 2021. (2) 10-Q 2/3/2021 10.16 10.17 A mendment No. 1 to the Qualcomm Incorporated Non-Qualified Deferred Compensation Plan . (2) X 52 Exhibit Number Exhibit Description Form Date of First Filing Exhibit Number Filed Herewith 10.18 Qualcomm Incorporated 202 3 Director Compensation Plan. (2) 10-K 11/2/2022 10.19 10.19 Qualcomm Incorporated 202 4 Director Compensation Plan. (2) X 10.20 Form s of 2016 Long-Term Incentive Plan Non-Employee Director Deferred Stock Unit Grant Notice s and Non-Employee Director Deferred Stock Unit Agreement s . (2) 10-Q 4/25/2018 10.60 10.21 Forms of Non-Employee Director Deferred Stock Unit Grant Notices and Non-Employee Director Deferred Stock Unit Agreements under the 2016 Long-Term Incentive Plan for Non-Employee Directors in Hong Kong. (2) 10-Q 4/28/21 10.4 10.22 Forms of Non-Employee Director Deferred Stock Unit Grant Notices and Non-Employee Director Deferred Stock Unit Agreements under the 2023 Long-Term Incentive Plan for Non-Employee Directors in the United States. (2) 10-Q 5/3/2023 10.27 10.23 Forms of Non-Employee Director Deferred Stock Unit Grant Notices and Non-Employee Director Deferred Stock Unit Agreements under the 2023 Long-Term Incentive Plan for Non-Employee Directors in Hong Kong. (2) 10-Q 5/3/2023 10.28 21 Subsidiaries of the Company. X 23.1 Consent of Independent Registered Public Accounting Firm. X 31.1 Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for Cristiano R. Amon. X 31.2 Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for Akash Palkhiwala. X 32.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, for Cristiano R. Amon. X 32.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, for Akash Palkhiwala. X 97 Incentive Compensation Repaymen t Policy ( Policy Relating to Recovery of Erroneously Awarded Compensation ) . X 101.INS Inline XBRL Instance Document. X 101.SCH Inline XBRL Taxonomy Extension Schema. X 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase. X 101.LAB Inline XBRL Taxonomy Extension Labels Linkbase. X 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase. X 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase. X 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). (1) We shall furnish supplementally a copy of any omitted schedule to the Commission upon request. (2) Indicates management contract or compensatory plan or arrangement required to be identified pursuant to Item 15(a). Item 16. Form 10-K Summary None. 53 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. QUALCOMM Incorporated November 1, 2023 By /s/ Cristiano R. Amon Cristiano R. Amon President and Chief Executive Officer 54 Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated: Signature Title Date /s/ Cristiano R. Amon President and Chief Executive Officer, and Director November 1, 2023 Cristiano R. Amon (Principal Executive Officer) /s/ Akash Palkhiwala Chief Financial Officer November 1, 2023 Akash Palkhiwala (Principal Financial Officer) /s/ Neil Martin Senior Vice President, Finance and Chief Accounting Officer November 1, 2023 Neil Martin (Principal Accounting Officer) /s/ Sylvia Acevedo Director November 1, 2023 Sylvia Acevedo /s/ Mark Fields Director November 1, 2023 Mark Fields /s/ Jeffrey W. Henderson Director November 1, 2023 Jeffrey W. Henderson /s/ Gregory N. Johnson Director November 1, 2023 Gregory N. Johnson /s/ Ann M. Livermore Director November 1, 2023 Ann M. Livermore /s/ Mark D. McLaughlin Chair of the Board November 1, 2023 Mark D. McLaughlin /s/ Jamie S. Miller Director November 1, 2023 Jamie S. Miller /s/ Irene B. Rosenfeld Director November 1, 2023 Irene B. Rosenfeld /s/ Kornelis (Neil) Smit Director November 1, 2023 Kornelis (Neil) Smit /s/ Jean-Pascal Tricoire Director November 1, 2023 Jean-Pascal Tricoire /s/ Anthony J. Vinciquerra Director November 1, 2023 Anthony J. Vinciquerra 55 Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of QUALCOMM Incorporated Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated balance sheets of QUALCOMM Incorporated and its subsidiaries (the “Company”) as of September 24, 2023 and September 25, 2022, and the related consolidated statements of operations, comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended September 24, 2023, including the related notes and financial statement schedule listed in the index appearing under Item 15(a)(2) (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of September 24, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of September 24, 2023 and September 25, 2022, and the results of its operations and its cash flows for each of the three years in the period ended September 24, 2023 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of September 24, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO. Basis for Opinions The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Critical Audit Matters The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated F-1 financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Revenue Recognition – Qualcomm CDMA Technologies (QCT) Customer Incentive Arrangements As described in Notes 1 and 2 to the consolidated financial statements, the Company’s QCT segment, which recorded revenues of $30.4 billion in fiscal 2023, records reductions to revenues for customer incentive arrangements, including volume-related and other pricing rebates and cost reimbursements for marketing and other activities involving certain products and technologies, in the period that the related revenues are earned. For certain QCT customer incentive arrangements, there is complexity in applying certain contractual terms to determine the amount recorded as a reduction to revenues. The amounts accrued for customer incentive arrangements are recorded as a reduction to accounts receivable, net or as other current liabilities based on whether the Company has the intent and contractual right of offset. Certain amounts recorded as a reduction to revenues for customer incentive arrangements are considered variable consideration and are included in the transaction price primarily based on estimating the most likely amount expected to be provided to the customer. The principal considerations for our determination that performing procedures relating to revenue recognition of QCT customer incentive arrangements is a critical audit matter are a high degree of auditor effort in performing procedures and evaluating audit evidence obtained related to the completeness and accuracy of reductions to revenues and accruals for QCT customer incentives arrangements recorded in the consolidated financial statements. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s review of and accounting for QCT customer incentive arrangements as well as controls relating to management’s review over the completeness and accuracy of reductions to revenues in fiscal 2023 and accruals for QCT customer incentive arrangements as of the balance sheet date. These procedures also included, among others, testing the completeness and accuracy of reductions to revenues and accruals for QCT customer incentive arrangements recorded in the consolidated financial statements, and recalculating, on a test basis, reductions to revenues and accruals for QCT customer incentive arrangements based upon customer-specific contractual terms. /s/ PricewaterhouseCoopers LLP San Diego, California November 1, 2023 We have served as the Company’s auditor since 1985. F-2 QUALCOMM Incorporated CONSOLIDATED BALANCE SHEETS (In millions, except par value amounts) September 24, 2023 September 25, 2022 ASSETS Current assets: Cash and cash equivalents $ 8,450 $ 2,773 Marketable securities 2,874 3,609 Accounts receivable, net 3,183 5,643 Inventories 6,422 6,341 Held for sale assets 341 733 Other current assets 1,194 1,625 Total current assets 22,464 20,724 Deferred tax assets 3,310 1,803 Property, plant and equipment, net 5,042 5,168 Goodwill 10,642 10,508 Other intangible assets, net 1,408 1,882 Held for sale assets 88 1,200 Other assets 8,086 7,729 Total assets $ 51,040 $ 49,014 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Trade accounts payable $ 1,912 $ 3,796 Payroll and other benefits related liabilities 1,685 1,486 Unearned revenues 293 369 Short-term debt 914 1,945 Held for sale liabilities 333 581 Other current liabilities 4,491 3,689 Total current liabilities 9,628 11,866 Unearned revenues 99 144 Income taxes payable 1,080 1,472 Long-term debt 14,484 13,537 Held for sale liabilities 38 119 Other liabilities 4,130 3,863 Total liabilities 29,459 31,001 Commitments and contingencies (Note 7) Stockholders’ equity: Preferred stock, $ 0.0001 par value; 8 shares authorized; no ne outstanding — — Common stock and paid-in capital, $ 0.0001 par value; 6,000 shares authorized; 1,114 and 1,121 shares issued and outstanding, respectively 490 195 Retained earnings 20,733 17,840 Accumulated other comprehensive income (loss) 358 ( 22 ) Total stockholders’ equity 21,581 18,013 Total liabilities and stockholders’ equity $ 51,040 $ 49,014 See accompanying notes. F-3 QUALCOMM Incorporated CONSOLIDATED STATEMENTS OF OPERATIONS (In millions, except per share data) Year Ended September 24, 2023 September 25, 2022 September 26, 2021 Revenues: Equipment and services $ 30,028 $ 37,171 $ 26,741 Licensing 5,792 7,029 6,825 Total revenues 35,820 44,200 33,566 Costs and expenses: Cost of revenues 15,869 18,635 14,262 Research and development 8,818 8,194 7,176 Selling, general and administrative 2,483 2,570 2,339 Other (Note 2) 862 ( 1,059 ) — Total costs and expenses 28,032 28,340 23,777 Operating income 7,788 15,860 9,789 Interest expense ( 694 ) ( 490 ) ( 559 ) Investment and other income (expense), net 349 ( 372 ) 1,044 Income from continuing operations before income taxes 7,443 14,998 10,274 Income tax expense ( 104 ) ( 2,012 ) ( 1,231 ) Income from continuing operations 7,339 12,986 9,043 Discontinued operations, net of income taxes ( 107 ) ( 50 ) — Net income $ 7,232 $ 12,936 $ 9,043 Basic earnings (loss) per share: Continuing operations $ 6.57 $ 11.56 $ 7.99 Discontinued operations ( 0.10 ) ( 0.04 ) — Net income $ 6.47 $ 11.52 $ 7.99 Diluted earnings (loss) per share: Continuing operations $ 6.52 $ 11.41 $ 7.87 Discontinued operations ( 0.10 ) ( 0.04 ) — Net income $ 6.42 $ 11.37 $ 7.87 Shares used in per share calculations: Basic 1,117 1,123 1,131 Diluted 1,126 1,137 1,149 See accompanying notes. F-4 QUALCOMM Incorporated CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In millions) Year Ended September 24, 2023 September 25, 2022 September 26, 2021 Net income $ 7,232 $ 12,936 $ 9,043 Other comprehensive income (loss), net of income taxes: Foreign currency translation gains (losses) 140 ( 433 ) 40 Net unrealized gains (losses) on certain available-for-sale debt securities 54 ( 113 ) ( 5 ) Net unrealized gains (losses) on derivative instruments 99 361 ( 53 ) Other gains (losses) 10 35 ( 2 ) Other reclassifications included in net income 77 — ( 59 ) Total other comprehensive income (loss) 380 ( 150 ) ( 79 ) Comprehensive income $ 7,612 $ 12,786 $ 8,964 See accompanying notes. F-5 QUALCOMM Incorporated CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions) Year Ended September 24, 2023 September 25, 2022 September 26, 2021 Operating Activities: Net income from continuing operations $ 7,339 $ 12,986 $ 9,043 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization expense 1,809 1,762 1,582 Indefinite and long-lived asset impairment charges 182 2 5 Income tax provision less than income tax payments ( 1,269 ) ( 138 ) ( 245 ) Share-based compensation expense 2,484 2,031 1,663 Net (gains) losses on marketable securities and other investments ( 152 ) 432 ( 1,002 ) Impairment losses on other investments 132 47 33 Other items, net 25 ( 56 ) ( 82 ) Changes in assets and liabilities: Accounts receivable, net 2,472 ( 2,066 ) 426 Inventories 8 ( 3,137 ) ( 622 ) Other assets 603 ( 2,266 ) ( 1,649 ) Trade accounts payable ( 1,880 ) 1,036 495 Payroll, benefits and other liabilities 1 ( 1,043 ) 1,091 Unearned revenues ( 56 ) ( 324 ) ( 202 ) Net cash used by operating activities from discontinued operations ( 399 ) ( 170 ) — Net cash provided by operating activities 11,299 9,096 10,536 Investing Activities: Capital expenditures ( 1,450 ) ( 2,262 ) ( 1,888 ) Purchases of debt and equity marketable securities ( 668 ) ( 1,414 ) ( 5,907 ) Proceeds from sales and maturities of debt and equity marketable securities 1,566 2,622 5,555 Acquisitions and other investments, net of cash acquired ( 235 ) ( 4,912 ) ( 1,377 ) Proceeds from sales of property, plant and equipment 127 5 3 Proceeds from other investments 20 132 320 Other items, net 19 41 ( 62 ) Net cash provided (used) by investing activities from discontinued operations 1,383 ( 16 ) — Net cash provided (used) by investing activities 762 ( 5,804 ) ( 3,356 ) Financing Activities: Proceeds from short-term debt 5,068 7,000 2,886 Repayment of short-term debt ( 5,566 ) ( 7,003 ) ( 2,885 ) Repayment of debt of acquired company — ( 349 ) — Proceeds from long-term debt 1,880 1,477 — Repayment of long-term debt ( 1,446 ) ( 1,540 ) — Proceeds from issuance of common stock 434 356 347 Repurchases and retirements of common stock ( 2,973 ) ( 3,129 ) ( 3,366 ) Dividends paid ( 3,462 ) ( 3,212 ) ( 3,008 ) Payments of tax withholdings related to vesting of share-based awards ( 521 ) ( 766 ) ( 737 ) Other items, net ( 19 ) ( 34 ) ( 35 ) Net cash (used) provided by financing activities from discontinued operations ( 58 ) 4 — Net cash used by financing activities ( 6,663 ) ( 7,196 ) ( 6,798 ) Effect of exchange rate changes on cash and cash equivalents 30 ( 113 ) 27 Net increase (decrease) in total cash and cash equivalents 5,428 ( 4,017 ) 409 Total cash and cash equivalents at beginning of period (including $ 326 classified as held for sale at September 25, 2022) 3,099 7,116 6,707 Total cash and cash equivalents at end of period (including $ 77 and $ 326 classified as held for sale at September 24, 2023 and September 25, 2022, respectively) $ 8,527 $ 3,099 $ 7,116 See accompanying notes. F-6 QUALCOMM Incorporated CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (In millions, except per share data) Year Ended September 24, 2023 September 25, 2022 September 26, 2021 Total stockholders’ equity, beginning balance $ 18,013 $ 9,950 $ 6,077 Common stock and paid-in capital: Balance at beginning of period 195 — 586 Common stock issued under employee benefit plans 434 356 345 Repurchases and retirements of common stock ( 2,218 ) ( 1,514 ) ( 1,958 ) Share-based compensation 2,600 2,119 1,754 Tax withholdings related to vesting of share-based payments ( 521 ) ( 766 ) ( 737 ) Stock awards assumed in acquisition — — 10 Balance at end of period 490 195 — Retained earnings: Balance at beginning of period 17,840 9,822 5,284 Net income 7,232 12,936 9,043 Repurchases and retirements of common stock ( 755 ) ( 1,615 ) ( 1,408 ) Dividends ( 3,584 ) ( 3,303 ) ( 3,097 ) Balance at end of period 20,733 17,840 9,822 Accumulated other comprehensive income (loss): Balance at beginning of period ( 22 ) 128 207 Other comprehensive income (loss) 380 ( 150 ) ( 79 ) Balance at end of period 358 ( 22 ) 128 Total stockholders’ equity, ending balance $ 21,581 $ 18,013 $ 9,950 Dividends per share announced $ 3.10 $ 2.86 $ 2.66 See accompanying notes. F-7 QUALCOMM Incorporated NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1. Significant Accounting Policies We are a global leader in the development and commercialization of foundational technologies for the wireless industry, including 3G, 4G and 5G wireless connectivity, and high-performance and low-power computing including on-device artificial intelligence (AI). Our technologies and products are used in mobile devices and other wireless products, including those used in the internet of things (IoT) and automotive systems for connectivity, digital cockpit and advanced driver assistance and automated driving (ADAS/AD). We derive revenues principally from sales of integrated circuit products and through the licensing of our intellectual property, including patents and other rights. Principles of Consolidation. The consolidated financial statements include the assets, liabilities and operating results of Qualcomm, its subsidiaries and any variable interest entities for which we are deemed to be the primary beneficiary (Note 9). Intercompany transactions and balances have been eliminated. Financial Statement Preparation. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions that affect the reported amounts and the disclosure of contingent amounts in our consolidated financial statements and the accompanying notes. Examples of our significant accounting estimates and policies that may involve a higher degree of judgment and complexity than others include: the estimation of sales-based royalty revenues; the impairment of non-marketable equity investments; the valuation of inventories; the impairment of goodwill, other indefinite-lived assets and long-lived assets; the recognition, measurement and disclosure of loss contingencies related to legal and regulatory proceedings; and the calculation of our income tax provision, including the recognition and measurement of uncertain tax positions. Actual results could differ from those estimates. Certain prior year amounts have been reclassified to conform to the current year presentation. Fiscal Year. We operate and report using a 52-53 week fiscal year ending on the last Sunday in September. The fiscal years presented each included 52 weeks. Cash Equivalents. We consider all highly liquid investments with original maturities of 90 days or less to be cash equivalents. Cash equivalents may be comprised of money market funds, certificates of deposit, commercial paper, corporate bonds and notes, certain bank time and demand deposits, U.S. Treasury securities and government-related securities. The carrying amounts approximate fair value due to the short maturities of these instruments. Marketable Securities. Marketable securities include marketable equity securities, available-for-sale debt securities and, from time-to-time, certain time deposits. We classify marketable securities as current or noncurrent based on the nature of the securities and their availability for use in current operations. Marketable securities are stated at fair value with all realized and unrealized gains and losses on investments in marketable equity securities and realized gains and losses on available-for-sale debt securities recognized in investment and other income (expense), net. Debt securities are classified as available-for-sale or held-to-maturity at the time of purchase and reevaluated at each balance sheet date. The realized and unrealized gains and losses on marketable securities are determined using the specific identification method. If a debt security has an unrealized loss and we either intend to sell the security or it is more likely than not that we will be required to sell the security before its anticipated recovery, we record an impairment charge to investment and other income (expense), net for the entire amount of the unrealized loss and adjust the amortized cost basis of the security. For the remaining debt securities, if an unrealized loss exists, we separate the impairment into the portion of the loss related to credit factors and the portion of the loss that is not related to credit factors. Unrealized gains or unrealized losses that are not related to credit factors on available-for-sale debt securities are recorded as a component of accumulated other comprehensive income (loss), net of income taxes. Unrealized losses that are related to credit loss factors on available-for-sale debt securities and subsequent adjustments to the credit loss are recorded as an allowance for credit losses, which is included in investment and other income (expense), net. In evaluating whether a credit loss exists, we consider a variety of factors, including the significance of the decline in value as compared to the cost basis; underlying factors contributing to a decline in the prices of securities in a single asset class; the security’s relative performance versus its peers, sector or asset class; the market and economy in general; views of external investment managers; news or financial information that has been released specific to the investee; and the outlook for the overall industry in which the investee operates. Equity Method and Non-marketable Equity Investments. Equity investments for which we have significant influence, but not control, over the investee and are not the primary beneficiary of the investee’s activities are accounted for under the equity method. Our share of gains and losses in equity method investments are recorded in investment and other income (expense), net. We eliminate unrealized profit or loss related to transactions with equity method investees in relation to our ownership interest in the investee, which is recorded as a component of equity in net earnings (losses) in investees in investment and other income (expense), net. Non-marketable equity investments (for which we do not have significant influence or control) are investments without readily determinable fair values that are recorded based on initial cost minus impairment, if any, plus or minus adjustments resulting from observable price changes in orderly transactions for identical or similar securities, if any. All gains and losses on investments in non-marketable equity securities, realized and unrealized, are recognized in investment and other income (expense), net. We monitor equity method and non-marketable equity investments for events or circumstances that could indicate the investments are impaired, such as a deterioration in the investee’s financial condition and business forecasts and lower valuations in recently completed or anticipated financings, and recognize a charge to investment and other income (expense), net for the difference between the estimated fair value and the carrying value. For F-8 QUALCOMM Incorporated NOTES TO CONSOLIDATED FINANCIAL STATEMENTS equity method investments, we record impairment losses in earnings only when impairments are considered other-than-temporary. Derivatives. Our primary objectives for holding derivative instruments are to manage foreign exchange risk for certain foreign currency revenues, operating expenses, receivables and payables and to manage interest rate risk associated with our cash equivalents, marketable securities and long-term debt. Derivative instruments are recorded at fair value and included in other current or noncurrent assets or liabilities based on their maturity dates. Counterparties to these derivative instruments are all major banking institutions. At September 24, 2023, the aggregate fair value of our derivative instruments recorded in total assets and in total liabilities were $ 32 million and $ 317 million, respectively. At September 25, 2022, the aggregate fair value of our derivative instruments recorded in total assets and in total liabilities were $ 271 million and $ 346 million, respectively. Foreign Currency Hedges: We manage our exposure to foreign exchange market risks, when deemed appropriate, through the use of derivative instruments, including foreign currency forward and option contracts with financial counterparties, that may or may not be designated as hedging instruments. These derivative instruments generally have maturity dates between one and 24 months. Gains and losses arising from such contracts that are designated as cash flow hedging instruments are recorded as a component of accumulated other comprehensive income (loss) as gains and losses on derivative instruments, net of income taxes. The hedging gains and losses in accumulated other comprehensive income (loss) are subsequently reclassified to revenues or costs and expenses, as applicable, in the consolidated statements of operations in the same period in which the underlying transactions affect our earnings. For foreign currency forward contracts not designated as hedging instruments, the changes in fair value are recorded in investment and other income (expense) , net in the period of change. The cash flows associated with such derivative instruments are classified as cash flows from operating activities in the consolidated statements of cash flows, which is the same category as the hedged transaction. Interest Rate Swaps: From time to time, we enter into interest rate swap agreements that allow us to effectively convert fixed-rate payments into floating-rate payments on portions of our outstanding long-term debt. We enter into these agreements to manage interest rate risk associated with our cash equivalents and marketable securities, in addition to changes in the fair value of our outstanding debt. These transactions are designated as fair value hedges, and the gains and losses related to changes in the fair value of the interest rate swaps substantially offset changes in the fair value of the hedged portion of the underlying debt that are attributable to changes in the market interest rates. The net gains and losses on the interest rate swaps, as well as the offsetting gains or losses on the related fixed-rate debt attributable to the hedged risks, are recognized as interest expense in the current period. The interest settlement payments associated with the interest rate swap agreements are classified as cash flows from operating activities in the consolidated statements of cash flows. From time to time, we also enter into forward-starting interest rate swaps to hedge the variability of forecasted interest payments on certain anticipated debt issuances. These swaps are designated as cash flow hedges of forecasted transactions. The gains and losses arising from such contracts are recorded as a component in accumulated other comprehensive income (loss) as gains and losses on derivative instruments. When the anticipated debt is issued, any associated swaps are terminated, and the hedging gains and losses in accumulated other comprehensive income (loss) are recorded to interest expense over the term of the hedged portions of the related debt issued. Gross Notional Amounts: The gross notional amounts of our foreign currency and interest rate derivatives by instrument type were as follows (in millions): September 24, 2023 September 25, 2022 Forwards $ 2,432 $ 3,176 Options 667 881 Swaps 2,050 3,650 $ 5,149 $ 7,707 The gross notional amounts of our derivatives by currency were as follows (in millions): September 24, 2023 September 25, 2022 Chinese renminbi $ 1,333 $ 1,920 Indian rupee 1,151 1,657 United States dollar 2,181 3,744 Other 484 386 $ 5,149 $ 7,707 F-9 QUALCOMM Incorporated NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Fair Value Measurements. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants as of the measurement date. Applicable accounting guidance provides an established hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in valuing the asset or liability and are developed based on market data obtained from sources independent of us. Unobservable inputs are inputs that reflect our assumptions about the factors that market participants would use in valuing the asset or liability. There are three levels of inputs that may be used to measure fair value: • Level 1 includes financial instruments for which quoted market prices for identical instruments are available in active markets. • Level 2 includes financial instruments for which there are inputs other than quoted prices included within Level 1 that are observable for the instrument. • Level 3 includes financial instruments for which fair value is derived from valuation techniques in which one or more significant inputs are unobservable, including our own assumptions. Assets and liabilities measured at fair value are classified based on the lowest level of input that is significant to the fair value measurement. We review the fair value hierarchy classification on a quarterly basis. Changes in the observability of valuation inputs may result in a reclassification of levels for certain securities within the fair value hierarchy. We recognize transfers into and out of levels within the fair value hierarchy at the end of the fiscal month in which the actual event or change in circumstances that caused the transfer to occur. Cash Equivalents and Marketable Securities: We obtain pricing information from quoted market prices, pricing vendors or quotes from brokers/dealers. We conduct reviews of our primary pricing vendors to determine whether the inputs used in the vendor’s pricing processes are deemed to be observable. Contractual sale restrictions are not considered in measuring the fair value of marketable equity securities. The fair value for interest-bearing securities includes accrued interest. The fair value of U.S. Treasury securities and government-related securities, corporate bonds and notes and common stock is generally determined using standard observable inputs, including reported trades, market based quotes, matrix pricing, benchmark yields, broker/dealer quotes, issuer spreads, two-sided markets and/or benchmark securities. The fair value of mortgage- and asset-backed securities is derived from the use of matrix pricing (prices for similar securities) or, in some cases, cash flow pricing models with observable inputs, such as contractual terms, maturity, credit rating and/or securitization structure to determine the timing and amount of future cash flows. Derivative Instruments: Derivative instruments that are traded on an exchange are valued using quoted market prices and are included in Level 1. Derivative instruments that are not traded on an exchange are valued using conventional calculations/models that are primarily based on observable inputs, such as foreign currency exchange rates, volatilities and interest rates, and therefore, such derivative instruments are included in Level 2. Other Investments and Other Liabilities: Other investments and other liabilities included in Level 1 are comprised of our deferred compensation plan liabilities and related assets, which consist of mutual funds and are included in other current assets and other assets. Gains and losses on the revaluation of our deferred compensation plan assets are recorded in investment and other income (expense), net. Corresponding offsetting amounts related to the revaluation of our deferred compensation plan liabilities are included in operating expenses. Other investments included in Level 3 are comprised of convertible debt instruments issued by private companies. The inputs we use to estimate the fair values of these instruments are generally unobservable, and therefore, they are included in Level 3. Nonrecurring Fair Value Measurements: We measure certain assets and liabilities at fair value on a nonrecurring basis. These assets and liabilities include equity method and non-marketable equity investments, assets acquired and liabilities assumed in an acquisition or in a nonmonetary exchange, and property, plant and equipment and intangible assets that are written down to fair value when they are held for sale or determined to be impaired, all of which are generally measured based on unobservable inputs using an income or market approach. Inventories. Inventories are valued at the lower of cost and net realizable value using the first-in, first-out method. Recoverability of inventories is assessed based on review of future customer demand that considers multiple factors, including committed purchase orders from customers as well as purchase commitment projections provided by customers and our own forecasts of customer demand, among other factors. This valuation also requires us to make judgments and assumptions based on information currently available about market conditions, including competition, anticipated technological changes, internal product life cycle and development plans, product pricing and other broader market conditions that may impact customer demand, such as the impact of certain capacity constraints experienced across the semiconductor industry in fiscal 2021 and through the third quarter of fiscal 2022, as well as the impact of the macroeconomic environment in fiscal 2022 and 2023. We generally place binding purchase orders with our suppliers in advance of receiving contractually binding forecasts and/or purchase orders from our customers. The time period between placing purchase orders with our suppliers and receiving contractually binding forecasts and/or purchase orders from our customers has increased and may continue to increase as a result of extended manufacturing lead-times, driven in part by a continued transition to leading-edge technologies and/or increased complexity in the manufacturing process of our products. If we overestimate demand for our products, the amount of our loss will be impacted by our ability to reduce inventory purchases from our suppliers. Further, if our customers cancel purchase orders or alter forecasts this may result in excess F-10 QUALCOMM Incorporated NOTES TO CONSOLIDATED FINANCIAL STATEMENTS inventory on hand. Our assumptions of future product demand are inherently uncertain, and changes in our estimates and assumptions may cause us to record additional write-downs in the future if demand forecasted for specific products is greater than actual demand. Property, Plant and Equipment. Property, plant and equipment are recorded at cost and depreciated or amortized using the straight-line method over their estimated useful lives. Upon the retirement or disposition of property, plant and equipment, the related cost and accumulated depreciation or amortization are removed, and a gain or loss is recorded, when appropriate. Buildings on owned land are depreciated over 30 years, and building improvements are depreciated over 15 years. Leasehold improvements and buildings on leased land are amortized over the shorter of their estimated useful lives, not to exceed 15 years and 30 years, respectively, or the remaining term of the related lease. Other property, plant and equipment have useful lives ranging from 2 to 15 years. Maintenance, repairs and minor renewals or betterments are charged to expense as incurred. Operating Leases. Operating lease assets and liabilities are recognized for leases with lease terms greater than 12 months based on the present value of the future lease payments over the lease term at the commencement date. Operating leases are included in other assets, other current liabilities and other liabilities on our consolidated balance sheet. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise such option. We account for substantially all lease and related non-lease components together as a single lease component. Operating lease expense is recognized on a straight-line basis over the lease term. Goodwill and Other Intangible Assets. Goodwill represents the excess of purchase price over the value assigned to the net tangible and identifiable intangible assets of businesses acquired. Acquired intangible assets other than goodwill are amortized over their useful lives unless the lives are determined to be indefinite. For intangible assets purchased in a business combination, the estimated fair values of the assets acquired are used to establish their recorded values. Valuation techniques consistent with the market approach, income approach and/or cost approach are used to measure fair value. An estimate of fair value can be affected by many assumptions that require significant judgment. For example, the income approach generally requires us to use assumptions to estimate future cash flows including those related to total addressable market, pricing and share forecasts, competition, technology obsolescence, future tax rates and discount rates. Our estimate of the fair value of certain assets may differ materially from that determined by others who use different assumptions or utilize different business models and from the future cash flows actually realized. Impairment of Goodwill, Other Indefinite-Lived Assets and Long-Lived Assets. Goodwill and other indefinite-lived intangible assets are tested annually for impairment in the fourth fiscal quarter, and in interim periods if events or changes in circumstances indicate that the assets may be impaired. If a qualitative assessment is used and we determine that the fair value of a reporting unit or indefinite-lived intangible asset is more likely than not (i.e., a likelihood of more than 50%) less than its carrying amount, a quantitative impairment test will be performed. If goodwill is quantitatively assessed for impairment and a reporting unit’s carrying value exceeds its fair value, the difference is recorded as an impairment. Other indefinite-lived intangible assets are quantitatively assessed for impairment, if necessary, by comparing their estimated fair values to their carrying values. If the carrying value exceeds the fair value, the difference is recorded as an impairment. Our judgments regarding the existence of impairment indicators and future cash flows related to goodwill, other indefinite-lived assets and long-lived assets may be based on operational performance of our businesses, market conditions, expected selling price and/or other factors. Although there are inherent uncertainties in this assessment process, the estimates and assumptions we use, including estimates of future cash flows and discount rates, are consistent with our internal planning, when appropriate. If these estimates or their related assumptions change in the future, we may be required to record an impairment charge on a portion or all of such assets. Furthermore, we cannot predict the occurrence of future impairment-triggering events nor the impact such events might have on our reported asset values. Long-lived assets, such as property, plant and equipment and intangible assets subject to amortization, are reviewed for impairment when there is evidence that events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. Recoverability of assets to be held and used is measured by comparing the carrying amount of an asset or asset group to estimated undiscounted future cash flows expected to be generated by the asset or asset group. If the carrying amount of an asset or asset group exceeds its estimated future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset or asset group exceeds the estimated fair value of the asset or asset group. Long-lived assets to be disposed of by sale are reported at the lower of their carrying amounts or their estimated fair values less costs to sell and are not depreciated. Revenue Recognition. We derive revenues principally from sales of integrated circuit products and licensing of our intellectual property. We also generate revenues from licensing system software and by performing development and other services and from other product sales. The timing of revenue recognition and the amount of revenue actually recognized in each case depends upon a variety of factors, including the specific terms of each arrangement and the nature of our performance obligations. Revenues from sales of our products are recognized upon transfer of control to the customer, which is generally at the time of shipment. Revenues from providing services are typically recognized over time as our performance obligation is F-11 QUALCOMM Incorporated NOTES TO CONSOLIDATED FINANCIAL STATEMENTS satisfied. Revenues from providing services and licensing system software were each less than 5 % of total revenues for all periods presented. We grant licenses or otherwise provide rights to use portions of our intellectual property portfolio, which, among other rights, includes certain patent rights essential to and/or useful in the manufacture, sale or use of certain wireless products. Licensees pay per-unit royalties based on their sales of products incorporating or using our licensed intellectual property and, to a lesser extent, lump sum payments (license fees). Per-unit royalties are generally based upon a percentage of the wholesale (i.e., licensee’s) selling price of complete licensed products, net of certain permissible deductions (including transportation, insurance, packing costs and other items), with certain products subject to per unit minimums and/or per unit caps. Certain products may also have a fixed royalty amount per unit. We estimate and recognize sales-based royalties on such licensed products in the period in which the associated sales occur, considering all relevant information (historical, current and forecasted) that is reasonably available to us. Our estimates of sales-based royalties are based largely on preliminary royalty estimates provided by our licensees and, to a lesser extent, an assessment of the volume of devices supplied into the market that incorporate or use our licensed intellectual property, combined with an estimate of the mix of such sales on a licensee-by-licensee basis, as well as the licensees’ average wholesale prices of such products. In the periods presented, we have recognized immaterial differences between preliminary royalty estimates provided to us by licensees and actual amounts reported and paid by licensees, which are generally received the following quarter, as licensees have not completed their royalty reporting process at the time estimates are provided to us, and in certain cases, they do not provide all necessary information in order for us to calculate an estimate of royalties due, which requires us to independently estimate certain information. We also consider in our estimates of sales-based royalties any changes in pricing we plan or expect to make and certain constraints on our ability to estimate such royalties. As a result of recognizing revenues in the period in which the licensees’ sales occur using estimates, adjustments to revenues are required in subsequent periods to reflect changes in estimates as new information becomes available, primarily resulting from actual amounts reported by our licensees. License agreements that require payment of license fees contain a single performance obligation that represents ongoing access to a portfolio of intellectual property over the license term since such agreements provide the licensee the right to access a portfolio of intellectual property that exists at inception of the license agreement and to updates and new intellectual property that is added to the licensed portfolio during the term of the agreement that are highly interdependent or interrelated. Since we expect to expend efforts to develop and transfer updates to our licensed portfolio on an even basis, license fees are recognized as revenues on a straight-line basis over the estimated period of benefit of the license to the licensee. We account for a contract with a customer/licensee when it is legally enforceable, the parties are committed to perform their respective obligations, the rights of the parties regarding the goods and/or services to be transferred are identified, payment terms are identified, the contract has commercial substance and collectability of substantially all of the consideration is probable, which for product sales, is generally when a customer purchase order is executed and for licensing revenues, is generally upon execution of a license agreement. If all such conditions are not met, revenues and any associated receivables are generally not recognized until such time that the required conditions are met. Cash collected from customers prior to a contract existing is recorded to other customer-related liabilities in other current liabilities. From time to time, regulatory authorities investigate our business practices, particularly with respect to our licensing business, and institute proceedings against us. Depending on the matter, various remedies that could result from an unfavorable resolution include, among others, the loss of our ability to enforce one or more of our patents; injunctions; monetary damages or fines or other orders to pay money; the issuance of orders to cease certain conduct or modify our business practices, such as requiring us to reduce our royalty rates, reduce the base on which our royalties are calculated, grant patent licenses to chipset manufacturers, sell chipsets to unlicensed original equipment manufacturers (OEMs) or modify or renegotiate some or all of our existing license agreements; and determinations that some or all of our license agreements are invalid or unenforceable. Additionally, from time to time, companies initiate various strategies in an attempt to negotiate, renegotiate, reduce and/or eliminate their need to pay royalties to us for the use of our intellectual property, which may include disputing, underreporting, underpaying, not reporting and/or not paying royalties owed to us under their license agreements with us, or reporting to us in a manner that is not in compliance with their contractual obligations. In such cases, we estimate and recognize licensing revenues only when we have a contract, as defined in the revenue recognition guidance, which includes, among other items, evaluating whether our license agreements remain valid and enforceable and evaluating licensees’ conduct and whether they remain committed to perform their respective obligations. We also estimate and recognize licensing revenues only to the extent it is probable that a significant reversal of cumulative revenues recognized will not occur, which includes, among other items, determining the expected impact, if any, to revenues of any license agreements that may be renegotiated and/or are newly entered into. We analyze the risk of a significant revenue reversal considering both the likelihood and magnitude of the reversal and, if necessary, constrain the amount of estimated revenues recognized in order to mitigate this risk, which may result in recognizing revenues less than amounts contractually owed to us. These aforementioned estimates may require significant judgment. We measure revenues (including our estimates of sales-based royalties) based on the amount of consideration we expect to receive in exchange for products or services. We record reductions to revenues for customer incentive arrangements, including volume-related and other pricing rebates and cost reimbursements for marketing and other activities involving certain of our products and technologies, in the period that the related revenues are earned. For certain QCT (Qualcomm CDMA Technologies) customer incentive arrangements, there is complexity in applying certain contractual terms to determine the amount recorded as a reduction to revenues. For the periods presented, no significant reversals of revenues F-12 QUALCOMM Incorporated NOTES TO CONSOLIDATED FINANCIAL STATEMENTS have been made related to such amounts previously recorded. The amounts accrued for customer incentive arrangements are recorded as a reduction to accounts receivable, net or as other current liabilities based on whether we have the intent and contractual right of offset. Certain amounts recorded as a reduction to revenues for customer incentive arrangements are considered variable consideration and are included in the transaction price primarily based on estimating the most likely amount expected to be provided to the customer/licensee. Adjustments made to revenues in subsequent periods to reflect changes in estimates as new information becomes available are included in our disclosure of revenues recognized from previously satisfied performance obligations (Note 2). Revenues recognized from sales of our products and sales-based royalties are generally included in accounts receivable, net (including unbilled receivables) based on our unconditional right to payment for satisfied or partially satisfied performance obligations. Share-Based Compensation. Share-based compensation expense for equity-classified awards, principally related to restricted stock units (RSUs), is measured at the grant date, or at the acquisition date for awards assumed in business combinations, based on the estimated fair value of the award and is recognized over the employee’s requisite service period. The fair values of RSUs are estimated based on the fair market values of the underlying stock on the dates of grant or dates the RSUs are assumed. Share-based compensation expense is adjusted to exclude amounts related to share-based awards that are expected to be forfeited. Legal and Regulatory Proceedings. We are currently involved in certain legal and regulatory proceedings. Litigation and investigations are inherently uncertain, and we face difficulties in evaluating or estimating likely outcomes or ranges of possible loss in antitrust and trade regulation investigations in particular. Investigations by antitrust and trade regulation agencies are not conducted in a consistent manner across jurisdictions. Further, each country and agency has different sets of laws, rules and regulations, both substantive and procedural, as well as different legal principles, theories and potential remedies, and some agencies may seek to use the investigation to advance domestic policy goals. Depending on the jurisdiction, these investigations can involve non-transparent procedures under which we may not receive access to evidence relied upon by the enforcement agency or that may be exculpatory and may not be informed of the specific legal theories or evidence considered or relied upon by the agency. Unlike in civil litigation in the United States, in foreign proceedings, we may not be entitled to discovery or depositions, allowed to cross-examine witnesses or confront our accusers. As a result, we may not be aware of, and may not be entitled to know, all allegations against us, or the information or documents provided to, or discovered or prepared by, the agency. Accordingly, we may have little or no idea what an agency’s intent is with respect to liability, penalties or the timing of a decision. In many cases the agencies are given significant discretion, and any available precedent may have limited, if any, predictive value in their jurisdictions or other jurisdictions. Accordingly, we cannot predict the outcome of these matters. A broad range of remedies with respect to our business practices that are deemed to violate applicable laws are potentially available. These remedies may include, among others, injunctions, monetary damages or fines or other orders to pay money and the issuance of orders to cease certain conduct and/or to modify our business practices. If there is at least a reasonable possibility that a material loss may have been incurred associated with pending legal and regulatory proceedings, we disclose such fact, and if reasonably estimable, we provide an estimate of the possible loss or range of possible loss. We record our best estimate of a loss related to pending legal and regulatory proceedings when the loss is considered probable and the amount can be reasonably estimated. Where a range of loss can be reasonably estimated with no best estimate in the range, we record the minimum estimated liability. As additional information becomes available, we assess the potential liability related to pending legal and regulatory proceedings and revise our estimates and update our disclosures accordingly. Significant judgment is required in both the determination of probability and the determination as to whether a loss is reasonably estimable. Our legal costs associated with defending ourselves are recorded to expense as incurred. Foreign Currency. Certain foreign subsidiaries use a local currency as the functional currency. Resulting translation gains or losses are recorded as a component of accumulated other comprehensive income (loss). Transaction gains or losses related to balances denominated in a currency other than the functional currency of the entity involved are recognized in the consolidated statements of operations. Income Taxes. The asset and liability approach is used to recognize deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. Tax law and rate changes are reflected in income in the period such changes are enacted. We record a valuation allowance to reduce deferred tax assets to the amount that is more likely than not to be realized. We include interest and penalties related to income taxes, including unrecognized tax benefits, within income tax expense. We classify all deferred tax assets and liabilities as noncurrent in the consolidated balance sheets. We recognize excess tax benefits and shortfall tax detriments associated with share-based awards in the consolidated statements of operations, as a component of income tax expense, when realized. Our income tax returns are based on calculations and assumptions that are subject to examination by the Internal Revenue Service (IRS) and other tax authorities. In addition, the calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax regulations. We recognize liabilities for uncertain tax positions based on a two-step process. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related F-13 QUALCOMM Incorporated NOTES TO CONSOLIDATED FINANCIAL STATEMENTS appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement. We continually assess the likelihood and amount of potential adjustments and adjust the income tax provision, income taxes payable and deferred taxes in the period in which the facts that give rise to a revision become known. We are subject to income taxes in the United States and numerous foreign jurisdictions, and the assessment of our income tax positions involves dealing with uncertainties in the application of complex tax laws and regulations in various taxing jurisdictions. In addition, the application of tax laws and regulations is subject to legal and factual interpretation, judgment and uncertainty. Tax laws and regulations themselves are subject to change as a result of changes in fiscal policy, changes in legislation, the evolution of regulations and court rulings. Significant judgments and estimates are required in determining our provision for income taxes, including those related to special deductions such as FDII (foreign-derived intangible income), tax incentives, intercompany research and development cost-sharing arrangements, transfer pricing, tax credits and the realizability of deferred tax assets. While we believe we have appropriate support for the positions we have taken or that we plan to take on our tax returns, we regularly assess the potential outcomes of examinations by taxing authorities in determining the adequacy of our provision for income taxes. Therefore, the actual liability for U.S. or foreign taxes may be materially different from our estimates, which could result in the need to record additional tax liabilities or potentially reverse previously recorded tax liabilities. For tax years prior to fiscal 2021, we are participating in the IRS Compliance Assurance Process program whereby we endeavor to agree with the IRS on the treatment of all issues prior to filing our federal return. Stock Repurchases. To reflect share repurchases in the consolidated balance sheet, we (i) reduce common stock for the par value of the shares, (ii) reduce paid-in capital for the amount in excess of par to zero during the quarter in which the shares are repurchased and (iii) record the residual amount, if any, to retained earnings. In August 2022, the Inflation Reduction Act was enacted in the United States, which included, among other items, a 1% excise tax on certain net stock repurchases that became effective for us after December 31. 2022. Any such excise tax on our stock repurchases will be recorded as a component of stockholders’ equity. Earnings Per Share. Basic earnings per share is computed by dividing net income by the weighted-average number of common shares outstanding during the reporting period. Diluted earnings per share is computed by dividing net income by the combination of the weighted-average number of common shares outstanding and the weighted-average number of dilutive common share equivalents, comprised of shares issuable under our share-based compensation plans, during the reporting period. The following table provides information about the diluted earnings per share calculation (in millions): 2023 2022 2021 Dilutive common share equivalents included in diluted shares 9 14 18 Shares of common stock equivalents not included because the effect would be anti-dilutive or certain performance conditions were not satisfied at the end of the period 7 1 — Note 2. Composition of Certain Financial Statement Items Accounts Receivable (in millions) September 24, 2023 September 25, 2022 Trade, net of allowances for doubtful accounts $ 1,923 $ 4,175 Unbilled 1,223 1,435 Other 37 33 $ 3,183 $ 5,643 Inventories (in millions) September 24, 2023 September 25, 2022 Raw materials $ 176 $ 221 Work-in-process 4,096 3,329 Finished goods 2,150 2,791 $ 6,422 $ 6,341 F-14 QUALCOMM Incorporated NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Property, Plant and Equipment (in millions) September 24, 2023 September 25, 2022 Land $ 169 $ 170 Buildings and improvements 1,849 1,767 Computer equipment and software 1,773 1,680 Machinery and equipment 8,078 7,349 Furniture and office equipment 130 105 Leasehold improvements 485 369 Construction in progress 226 330 12,710 11,770 Less accumulated depreciation and amortization ( 7,668 ) ( 6,602 ) $ 5,042 $ 5,168 Depreciation and amortization expense related to property, plant and equipment for fiscal 2023, 2022 and 2021 was $ 1.4 billion, $ 1.3 billion and $ 1.0 billion, 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 2023 and 2022 (in millions): QCT QTL Total Balance at September 26, 2021 $ 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 Acquisitions 76 — 76 Foreign currency translation adjustments 56 2 58 Balance at September 24, 2023 (1) $ 9,909 $ 733 $ 10,642 (1) Cumulative goodwill impairments were $ 812 million at both September 24, 2023 and September 25, 2022. The components of other intangible assets, net were as follows (in millions): September 24, 2023 September 25, 2022 Gross Carrying Amount Accumulated Amortization Weighted-average amortization period (years) Gross Carrying Amount Accumulated Amortization Weighted-average amortization period (years) Technology-based $ 4,292 $ ( 2,912 ) 12 $ 5,517 $ ( 3,669 ) 12 Other 70 ( 42 ) 11 90 ( 56 ) 10 $ 4,362 $ ( 2,954 ) 11 $ 5,607 $ ( 3,725 ) 10 All of these intangible assets are subject to amortization, other than acquired in-process research and development which had a carrying value of $ 435 million and $ 546 million at September 24, 2023 and September 25, 2022, respectively. Amortization expense related to these intangible assets was $ 418 million, $ 482 million and $ 537 million for fiscal 2023, 2022 and 2021, respectively. At September 24, 2023, 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 $ 296 million, $ 264 million, $ 250 million, $ 167 million and $ 139 million for each of the five years from fiscal 2024 through 2028, respectively, and $ 292 million thereafter. F-15 QUALCOMM Incorporated NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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 24, 2023 September 25, 2022 Equity method investments $ 164 $ 189 Non-marketable equity investments 1,072 1,105 $ 1,236 $ 1,294 Other Current Liabilities (in millions) September 24, 2023 September 25, 2022 Customer incentives and other customer-related liabilities $ 1,821 $ 1,879 Income taxes payable 1,717 634 Other 953 1,176 $ 4,491 $ 3,689 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). Beginning in the first quarter of fiscal 2023, QCT RFFE (radio frequency front-end) revenues, which were previously presented as a separate revenue stream, are now included within our Handsets, Automotive and internet of things (IoT) revenue streams as applicable. Prior period information has been recast to reflect this change. RFFE revenues include revenues from the sale of 4G, 5G sub 6 and 5G millimeter wave RFFE products (a substantial portion of which relate to mobile handsets) and exclude radio frequency transceiver components. This change aligns with changes made to our internal reporting of revenues. We believe this change provides a more meaningful presentation in understanding QCT revenues going forward, as we expect RFFE revenues to correspond with trends in Handsets, Automotive and IoT (as applicable) and is more consistent with how our revenue diversification is viewed externally. 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): 2023 2022 2021 Handsets (1) $ 22,570 $ 28,815 $ 20,475 Automotive (2) 1,872 1,509 1,110 IoT (internet of things) (3) 5,940 7,353 5,434 Total QCT revenues $ 30,382 $ 37,677 $ 27,019 (1) Includes revenues from products sold for use in mobile handsets. (2) Includes revenues from products sold for use in automobiles, including connectivity, digital cockpit and ADAS/AD. (3) 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, tracking and logistics and utilities). Revenues recognized from performance obligations satisfied (or partially satisfied) in previous periods generally include certain QCT sales-based royalty revenues related to system software, certain amounts related to QCT customer incentives and 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) and were as follows (in millions): 2023 2022 2021 Revenues recognized from previously satisfied performance obligations $ 598 $ 788 $ 283 Unearned revenues (which are considered contract liabilities) consist primarily of certain customer contracts for which QCT received fees upfront and QTL license fees for intellectual property with continuing performance obligations. In fiscal 2023 and fiscal 2022, we recognized revenues of $ 355 million and $ 609 million, respectively, that were recorded as unearned revenues at September 25, 2022 and September 26, 2021, respectively. Remaining performance obligations, which are primarily included in unearned revenues (as presented on our consolidated balance sheet), represent the aggregate amount of the transaction price of certain customer contracts yet to be F-16 QUALCOMM Incorporated NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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. Concentrations. A significant portion of our revenues are concentrated with a small number of customers/licensees of our QCT and QTL (Qualcomm Technology Licensing) segments. The comparability of customer/licensee concentrations for the periods presented are impacted by the timing of customer/licensees device launches and/or innovation cycles and other seasonal trends, among other fluctuations in demand. Revenues from each customer/licensee that were 10% or greater of total revenues were as follows: September 24, 2023 September 25, 2022 September 26, 2021 Customer/licensee (w) 27 % 21 % 23 % Customer/licensee (x) 21 21 14 Customer/licensee (y) * * 13 * Less than 10% We rely on sole- or limited-source suppliers for some products, particularly products in our QCT segment, subjecting us to possible shortages of raw materials or manufacturing capacity. The loss of a supplier or the inability of a supplier to meet performance or quality specifications or delivery schedules could harm our ability to meet our delivery obligations and/or negatively impact our revenues, business operations and ability to compete for future business. Other Income, Costs and Expenses. Other expenses in fiscal 2023 consisted of $ 712 million in total restructuring and restructuring-related charges (substantially all of which related to severance costs, resulting from certain cost reduction actions committed to in fiscal 2023) and a $ 150 million intangible asset impairment charge related to in-process research and development. Actions associated with restructuring plans initiated in the first half of fiscal 2023 were substantially completed (including payments of the related severance) by the end of fiscal 2023. Given the continued uncertainty in the macroeconomic and demand environment, we initiated additional restructuring actions in the fourth quarter of fiscal 2023 to enable investments in key growth and diversification opportunities. These actions resulted in $ 385 million in accrued severance costs in the fourth quarter of fiscal 2023. We anticipate these additional actions to be substantially completed (including payments of the related severance) in the first half of fiscal 2024. We may incur additional restructuring and restructuring-related charges, as the actual amount of costs may differ from our current expectations and estimates. 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. As a result of the court’s decision, we recorded a $ 1.1 billion benefit to other income in fiscal 2022. Investment and Other Income (Expense), Net (in millions) 2023 2022 2021 Interest and dividend income $ 313 $ 91 $ 83 Net gains (losses) on marketable securities 75 ( 363 ) 427 Net gains on other investments 21 113 470 Net gains (losses) on deferred compensation plan assets 86 ( 141 ) 130 Impairment losses on other investments ( 132 ) ( 47 ) ( 33 ) Other ( 14 ) ( 25 ) ( 33 ) $ 349 $ ( 372 ) $ 1,044 F-17 QUALCOMM Incorporated NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 3. Income Taxes The components of the income tax provision from continuing operations were as follows (in millions): 2023 2022 2021 Current provision: Federal $ 1,229 $ 1,114 $ 942 State 10 1 8 Foreign (1) 491 906 518 1,730 2,021 1,468 Deferred (benefit) provision: Federal ( 1,475 ) ( 34 ) ( 251 ) State ( 8 ) 15 2 Foreign (1) ( 143 ) 10 12 ( 1,626 ) ( 9 ) ( 237 ) $ 104 $ 2,012 $ 1,231 (1) The foreign component of the income tax provision included foreign withholding taxes on royalty revenues included in U.S. earnings. The components of income from continuing operations before income taxes by U.S. and foreign jurisdictions were as follows (in millions): 2023 2022 2021 United States $ 6,400 $ 12,537 $ 8,781 Foreign 1,043 2,461 1,493 $ 7,443 $ 14,998 $ 10,274 The following is a reconciliation of the expected statutory federal income tax provision to our actual income tax provision from continuing operations (in millions, except percentages). A significant portion of our U.S. income qualifies for preferential treatment as FDII (foreign-derived intangible income) at a 13 % effective tax rate. 2023 2022 2021 Expected income tax provision at federal statutory tax rate $ 1,563 $ 3,150 $ 2,158 Benefit from FDII deduction related to capitalizing research and development expenditures ( 598 ) — — Benefit from FDII deduction, excluding the impact of capitalizing research and development expenditures ( 447 ) ( 753 ) ( 550 ) Benefit related to research and development tax credits ( 235 ) ( 224 ) ( 195 ) Benefit from fiscal 2021 and 2022 FDII deductions related to a change in sourcing of research and development expenditures ( 126 ) — — Benefit from releasing valuation allowance on unutilized foreign loss carryforwards ( 114 ) — — Foreign currency (gains) losses related to Korean withholding tax receivable ( 66 ) 243 12 Shortfall (excess) tax benefit associated with share-based awards 3 ( 257 ) ( 265 ) Nontaxable reversal of 2018 EC fine — ( 224 ) — Other 124 77 71 $ 104 $ 2,012 $ 1,231 Effective tax rate 1 % 13 % 12 % Beginning in fiscal 2023, for federal income tax purposes, we are required to capitalize and amortize domestic research and development expenditures over five years and foreign research and development expenditures over fifteen years (such expenditures were previously deducted as incurred). Our cash flows from operations will be adversely affected due to significantly higher cash tax payments. However, since the resulting deferred tax asset is established at the statutory rate of 21 % (rather than the current effective tax rate of 13 % to 16 % after considering the FDII deduction), capitalization favorably affects our total provision for income taxes and results of operations. The adverse cash flow impact and favorable tax provision impact will diminish in future years as capitalized research and development expenditures continue to amortize. F-18 QUALCOMM Incorporated NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Beginning in fiscal 2019, as a result of certain court rulings in Korea, among other factors, we decided to apply for a partial refund claim for taxes previously withheld from licensees in Korea on payments due under their license agreements to which we have claimed a foreign tax credit in the United States. As a result, $ 2.0 billion and $ 1.7 billion was recorded as a noncurrent income taxes receivable (recorded in other assets) at September 24, 2023 and September 25, 2022, respectively, and $ 2.3 billion and $ 2.1 billion was recorded as a noncurrent liability for uncertain tax benefits (recorded in other liabilities) at September 24, 2023 and September 25, 2022, respectively. Income taxes payable (recorded in other current liabilities) were $ 1.7 billion and $ 634 million at September 24, 2023 and September 25, 2022, respectively. This increase was primarily due to announcements by the Internal Revenue Service (IRS), which postponed our remaining current year U.S. federal income tax-payments from fiscal 2023, which were paid in October 2023. At September 24, 2023, we estimated remaining future payments of $ 1.5 billion for a one-time repatriation tax accrued in fiscal 2018, after application of certain tax credits, which is payable in installments over the next three years. At September 24, 2023, $ 391 million was recorded in other current liabilities, reflecting the next installment due in January 2024, with the remaining noncurrent portion presented as income taxes payable on our balance sheet. We had deferred tax assets and deferred tax liabilities as follows (in millions): September 24, 2023 September 25, 2022 Unused tax credits $ 1,819 $ 1,624 Capitalized research and development expenditures 1,490 — Customer incentives 659 807 Accrued liabilities and reserves 401 264 Unused net operating losses 364 887 Share-based compensation 285 225 Operating lease liabilities 216 202 Unrealized losses on other investments and marketable securities 159 197 Other 409 435 Total gross deferred tax assets 5,802 4,641 Valuation allowance ( 1,803 ) ( 2,223 ) Total net deferred tax assets 3,999 2,418 Intangible assets ( 335 ) ( 315 ) Operating lease assets ( 194 ) ( 184 ) Unrealized gains on other investments and marketable securities ( 101 ) ( 84 ) Property, plant and equipment ( 52 ) ( 101 ) Other ( 118 ) ( 98 ) Total deferred tax liabilities ( 800 ) ( 782 ) Net deferred tax assets $ 3,199 $ 1,636 Reported as: Non-current deferred tax assets $ 3,310 $ 1,803 Non-current deferred tax liabilities (1) ( 111 ) ( 167 ) $ 3,199 $ 1,636 (1) Non-current deferred tax liabilities were included in other liabilities in the consolidated balance sheets. At September 24, 2023, we had unused federal net operating loss carryforwards of $ 448 million, of which $ 118 million expire from 2024 through 2037 and $ 330 million may be carried forward indefinitely, unused state net operating loss carryforwards of $ 707 million expiring from 2024 through 2037 and unused foreign net operating loss carryforwards of $ 910 million, of which substantially all may be carried forward indefinitely. At September 24, 2023, we had unused state tax credits of $ 1.7 billion, of which substantially all may be carried forward indefinitely, unused federal tax credits of $ 134 million expiring from 2028 through 2041 and unused tax credits of $ 54 million in foreign jurisdictions expiring from 2034 through 2043. We do not expect our federal net operating loss carryforwards to expire unused. At September 24, 2023, we have provided a valuation allowance on certain state tax credits, foreign deferred tax assets and state net operating losses of $ 1.7 billion, $ 77 million and $ 36 million respectively. The valuation allowance reflects the F-19 QUALCOMM Incorporated NOTES TO CONSOLIDATED FINANCIAL STATEMENTS uncertainties surrounding our ability to generate sufficient future taxable income in certain tax jurisdictions to utilize our net deferred tax assets. We believe, more likely than not, that we will have sufficient taxable income to utilize our remaining deferred tax assets. The valuation allowance decreased from $ 2.2 billion at September 25, 2022, primarily due to the write-off of certain deferred tax assets and the related valuation allowance resulting from the liquidation of a Dutch subsidiary in fiscal 2023. A summary of the changes in the amount of unrecognized tax benefits for fiscal 2023, 2022 and 2021 follows (in millions): 2023 2022 2021 Beginning balance of unrecognized tax benefits $ 2,191 $ 2,136 $ 1,901 Additions based on prior year tax positions 10 58 56 Reductions for prior year tax positions and lapse in statute of limitations ( 63 ) ( 136 ) ( 13 ) Additions for current year tax positions 158 184 213 Settlements with taxing authorities — ( 51 ) ( 21 ) Ending balance of unrecognized tax benefits $ 2,296 $ 2,191 $ 2,136 Of the $ 2.3 billion of unrecognized tax benefits, $ 2.1 billion has been recorded to other liabilities. We believe that it is reasonably possible that certain unrecognized tax benefits recorded at September 24, 2023 may result in a cash payment in fiscal 2024. Unrecognized tax benefits at September 24, 2023 included $ 92 million for tax positions that, if recognized, would impact the effective tax rate. The unrecognized tax benefits differ from the amount that would affect our effective tax rate primarily because the unrecognized tax benefits were included on a gross basis and did not reflect related receivables or secondary impacts, such as the federal deduction for state taxes, adjustments to deferred tax assets and the valuation allowance that might be required if our tax positions are sustained. The increase in unrecognized tax benefits for all periods presented was primarily due to expected refunds of Korean withholding tax previously paid (which such increase had an insignificant impact to our income tax provision). If successful, the refund will result in a corresponding reduction in U.S. foreign tax credits. We believe that it is likely that the total amount of unrecognized tax benefits at September 24, 2023 will increase in fiscal 2024 as licensees in Korea continue to withhold taxes on future payments due under their licensing agreements at a rate higher than we believe is owed; such increase is not expected to have a significant impact on our income tax provision. At September 24, 2023, total interest and penalties related to unrecognized tax benefits accrued in other current liabilities and other liabilities was $ 199 million, with a corresponding noncurrent income taxes receivable of $ 139 million recorded in other assets for expected refunds of certain tax benefits. We file income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. We are no longer subject to U.S. federal income tax examinations for years prior to fiscal 2018. We are also subject to examination in other taxing jurisdictions in the U.S. and numerous foreign jurisdictions. These examinations are at various stages with respect to assessments, claims, deficiencies and refunds, many of which are open for periods after fiscal 2001. Cash amounts paid for income taxes, net of refunds received, were $ 1.4 billion, $ 2.1 billion and $ 1.5 billion for fiscal 2023, 2022 and 2021, respectively. Note 4. Capital Stock Stock Repurchase Program. On October 12, 2021, we announced a $ 10.0 billion stock repurchase program. The stock repurchase program has no expiration date. At September 24, 2023, $ 5.1 billion remained authorized for repurchase under our stock repurchase program. Shares Outstanding. Shares of common stock outstanding at September 24, 2023 were as follows (in millions): Balance at beginning of period 1,121 Issued 18 Repurchased ( 25 ) Balance at end of period 1,114 Dividends. On October 13, 2023 , we announced a cash dividend of $ 0.80 per share on our common stock, payable on December 14, 2023 to stockholders of record as of the close of business on November 30, 2023 . F-20 QUALCOMM Incorporated NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 5. Employee Benefit Plans Equity Compensation Plans. On March 8, 2023, our stockholders approved the Qualcomm Incorporated 2023 Long-Term Incentive Plan (the 2023 Plan), as a successor to and continuation of our Amended and Restated Qualcomm Incorporated 2016 Long-Term Incentive Plan (the Prior Plan), and to increase the share reserve by 82 million shares. Effective on and after that date, no new awards were granted under the Prior Plan, although all outstanding awards under the Prior Plan remained outstanding according to their terms and the terms of the Prior Plan. The 2023 Plan provides for the grant of RSUs and other stock-based awards. The RSUs generally include dividend-equivalent rights and vest over three years from the date of grant. The Board of Directors may amend or terminate the 2023 Plan at any time. Certain amendments, including an increase in the share reserve, require stockholder approval. At September 24, 2023, approximately 88 million shares were available for future grant under the 2023 Plan. The following is a summary of employee RSU transactions that contain only service requirements to vest: Number of Shares (in millions) Weighted-Average Grant Date Fair Value RSUs outstanding at September 25, 2022 30 $ 127.58 RSUs granted 25 116.80 RSUs canceled/forfeited ( 3 ) 124.51 RSUs vested ( 17 ) 122.19 RSUs outstanding at September 24, 2023 35 122.86 The weighted-average estimated grant date fair values of employee RSUs that contain only service requirements to vest granted during fiscal 2022 and 2021 were $ 136.09 and $ 124.22 per share, respectively. Upon vesting, we issue new shares of common stock. For the majority of RSUs, shares are issued on the vesting dates net of the amount of shares needed to satisfy statutory tax withholding requirements to be paid by us on behalf of the employees. As a result, the actual number of shares issued will be fewer than the number of RSUs outstanding. The annual pre-vest forfeiture rate for RSUs was estimated to be approximately 7 %, 6 % and 6 % in fiscal 2023, 2022 and 2021, respectively. At September 24, 2023, total unrecognized compensation expense related to such non-vested RSUs granted prior to that date was $ 2.9 billion, which is expected to be recognized over a weighted-average period of 1.8 years. The total vest-date fair value of such RSUs that vested during fiscal 2023, 2022 and 2021 was $ 2.1 billion, $ 2.9 billion and $ 2.6 billion, respectively. The total shares withheld to satisfy statutory tax withholding requirements related to all share-based awards were 4 million, 5 million and 5 million in fiscal 2023, 2022 and 2021, respectively and were based on the value of the awards on their vesting dates as determined by our closing stock price. The total tax benefits realized, including the excess tax benefits, related to share-based awards during fiscal 2023, 2022 and 2021 were $ 435 million, $ 627 million and $ 567 million, respectively. Employee Stock Purchase Plan. We have an employee stock purchase plan that allows eligible employees to purchase shares of common stock at 85 % of the value of our common stock on specific dates through periodic payroll deductions. The shares reserved for future issuance under the employee stock purchase plan were 19 million at September 24, 2023. We recorded cash received from the exercise of purchase rights of $ 395 million, $ 355 million and $ 343 million during fiscal 2023, 2022 and 2021, respectively. Share-based Compensation Expense. Total share-based compensation expense, related to all of our share-based awards, was comprised as follows (in millions): 2023 2022 2021 Cost of revenues $ 76 $ 61 $ 47 Research and development 1,911 1,537 1,234 Selling, general and administrative 497 463 389 Share-based compensation expense before income taxes 2,484 2,061 1,670 Related income tax benefit ( 463 ) ( 489 ) ( 435 ) $ 2,021 $ 1,572 $ 1,235 F-21 QUALCOMM Incorporated NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 6. Debt Long-term Debt. In November 2022, we issued unsecured fixed-rate notes, consisting of $ 700 million of fixed-rate 5.40 % notes and $ 1.2 billion of fixed-rate 6.00 % notes (collectively, November 2022 Notes) that mature on May 20, 2033 and May 20, 2053, respectively. The net proceeds from the November 2022 Notes were used to repay $ 946 million of fixed-rate notes and $ 500 million of floating-rate notes that matured in January 2023 and the excess was used for general corporate purposes. The following table provides a summary of our long-term debt and current portion of long-term debt: September 24, 2023 September 25, 2022 Maturities Amount (in millions) Effective Rate Maturities Amount (in millions) Effective Rate May 2015 Notes 2025 - 2045 $ 3,865 3.46 % - 4.73 % 2025 - 2045 $ 3,865 3.46 % - 4.73 % May 2017 Notes 2024 - 2047 4,414 3.00 % - 4.45 % 2023 - 2047 5,860 2.68 % - 4.46 % May 2020 Notes 2030 - 2050 2,000 3.22 % - 3.30 % 2030 - 2050 2,000 2.97 % - 3.30 % August 2020 Notes 2028 - 2032 2,207 2.65 % - 3.89 % 2028 - 2032 2,207 2.50 % - 3.52 % May 2022 Notes 2032 - 2052 1,500 3.15 % - 4.27 % 2032 - 2052 1,500 3.13 % - 4.26 % November 2022 Notes 2033 - 2053 1,900 3.47 % - 5.02 % — Total principal 15,886 15,432 Unamortized discount, including debt issuance costs ( 238 ) ( 241 ) Hedge accounting adjustments ( 250 ) ( 208 ) Total long-term debt $ 15,398 $ 14,983 Reported as: Short-term debt $ 914 $ 1,446 Long-term debt 14,484 13,537 Total $ 15,398 $ 14,983 At September 24, 2023, future principal payments were $ 914 million in fiscal 2024, $ 1.4 billion in fiscal 2025, $ 2.0 billion in fiscal 2027, $ 961 million in fiscal 2028 and $ 10.6 billion after fiscal 2028; no principal payments are due in fiscal 2026. At September 24, 2023, the aggregate fair value of the notes, based on Level 2 inputs, was approximately $ 14.3 billion. At September 24, 2023, all of our outstanding long-term debt is comprised of unsecured fixed-rate notes. We may redeem the outstanding fixed-rate notes at any time in whole, or from time to time in part, at specified make-whole premiums as defined in the applicable form of note. The obligations under the notes rank equally in right of payment with all of our other senior unsecured indebtedness and will effectively rank junior to all liabilities of our subsidiaries. The effective interest rates for the notes include the interest on the notes, amortization of the discount, which includes debt issuance costs, and if applicable, adjustments related to hedging. Interest is payable in arrears semi-annually for the notes. Cash interest paid related to our commercial paper program and long-term debt was $ 614 million, $ 491 million and $ 477 million during fiscal 2023, 2022 and 2021, respectively. Interest Rate Swaps. At September 25, 2022, we had outstanding forward-starting interest rate swaps with an aggregate notional amount of $ 1.6 billion. During the first quarter of fiscal 2023, in connection with the issuance of the November 2022 Notes, we terminated these swaps, and the related gains of $ 334 million, included within accumulated comprehensive income, are being recorded as a reduction to interest expense over the hedged portions of the related debt. At September 24, 2023 and September 25, 2022, we had outstanding interest rate swaps with an aggregate notional amount of $ 2.1 billion that are designated as fair value hedges and allow us to effectively convert fixed-rate payments into floating-rate payments on a portion of our outstanding long-term debt. Commercial Paper Program . We have an unsecured commercial paper program, which provides for the issuance of up to $ 4.5 billion. Net proceeds from this program are for general corporate purposes. Maturities of commercial paper can range from 1 to up to 397 days. At September 24, 2023 and September 25, 2022, we had no amounts and $ 499 million, respectively, of outstanding commercial paper recorded as short-term debt. At September 25, 2022, the weighted-average interest rate was 2.69 %, which included fees paid to the commercial paper dealers, and the weighted-average remaining days to maturity was 27 days. Revolving Credit Facility. We have a Revolving Credit Facility that provides for unsecured revolving facility loans, swing line loans and letters of credit in an aggregate amount of up to $ 4.3 billion, which expires on December 8, 2025. At September 24, 2023 and September 25, 2022, no amounts were outstanding under the Revolving Credit Facility. F-22 QUALCOMM Incorporated NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Debt Covenants. The Revolving Credit Facility requires that we comply with certain covenants, including that we maintain an interest coverage ratio as defined in the agreement. We are not subject to any financial covenants under the notes nor any covenants that would prohibit us from incurring additional indebtedness ranking equal to the notes, paying dividends or issuing securities or repurchasing securities issued by us or our subsidiaries. At September 24, 2023, we were in compliance with the applicable covenants under the Revolving Credit Facility. Note 7. Commitments and Contingencies Legal and Regulatory Proceedings. Consolidated Securities Class Action Lawsuit: On January 23, 2017 and January 26, 2017, securities class action complaints were filed by purported stockholders of us in the United States District Court for the Southern District of California against us and certain of our then current and former officers and directors. The complaints alleged, among other things, that we violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 thereunder, by making false and misleading statements and omissions of material fact in connection with certain allegations that we are or were engaged in anticompetitive conduct. The complaints sought unspecified damages, interest, fees and costs. The court consolidated the two actions, and on July 3, 2017, the plaintiffs filed a consolidated amended complaint asserting the same basic theories of liability and requesting the same basic relief. On May 23, 2022, the plaintiffs filed a motion for class certification, and on March 20, 2023, the court issued an order granting in part and denying in part the plaintiffs’ motion for class certification. The order denied class certification on the basis of alleged misrepresentations relating to our chip-level licensing practices, but certified a class on the basis of alleged misrepresentations relating to the separate operations of QCT and QTL. Trial is scheduled to begin on October 28, 2024. We intend to continue to vigorously defend ourselves in this matter. Consumer Class Action Lawsuits: Beginning in January 2017, a number of consumer class action complaints were filed against us in the United States District Courts for the Southern and Northern Districts of California, each on behalf of a putative class of purchasers of cellular phones and other cellular devices. The cases filed in the Southern District of California were subsequently transferred to the Northern District of California. On July 11, 2017, the plaintiffs filed a consolidated amended complaint alleging that we violated California and federal antitrust and unfair competition laws by, among other things, refusing to license standard-essential patents to our competitors, conditioning the supply of certain of our baseband chipsets on the purchaser first agreeing to license our entire patent portfolio, entering into exclusive deals with companies, including Apple Inc., and charging unreasonably high royalties that do not comply with our commitments to standard setting organizations. The complaint sought unspecified damages and disgorgement and/or restitution, as well as an order that we be enjoined from further unlawful conduct. On September 27, 2018, the court certified the class. We appealed the court’s class certification order to the United States Court of Appeals for the Ninth Circuit (Ninth Circuit). On September 29, 2021, the Ninth Circuit vacated the class certification order, ruling that the district court had failed to correctly assess the propriety of applying California law to a nationwide class, and remanded the case to the district court. On June 10, 2022, the plaintiffs filed an amended complaint, limiting the proposed class to California residents rather than a nationwide class. We filed a motion to dismiss the amended complaint, and on January 6, 2023, the court issued an order granting in part and denying in part our motion to dismiss. We subsequently filed a motion for summary judgment on the plaintiffs’ remaining claims. The court granted our motion in its entirety and, on October 5, 2023, entered final judgment in Qualcomm’s favor. Beginning in November 2017, several other consumer class action complaints were filed against us in Canada (in the Supreme Court of British Columbia and the Quebec Superior Court), Israel (in the Haifa District Court) and the United Kingdom (in the Competition Appeal Tribunal), each on behalf of a putative class of purchasers of cellular phones and other cellular devices, alleging violations of certain of those countries’ competition and consumer protection laws and seeking damages. The claims in these complaints are similar to those in the U.S. consumer class action complaints described above. These matters are at various stages of litigation, and we intend to continue to vigorously defend ourselves. ParkerVision, Inc. v. QUALCOMM Incorporated: On May 1, 2014, ParkerVision filed a complaint against us in the United States District Court for the Middle District of Florida alleging that certain of our products infringed seven ParkerVision patents. On August 21, 2014, ParkerVision amended the complaint, alleging that we infringed 11 ParkerVision patents and sought damages and injunctive and other relief. ParkerVision subsequently reduced the number of patents asserted to three. The asserted patents are now expired, and injunctive relief is no longer available. ParkerVision continues to seek damages related to the sale of many of our radio frequency (RF) products sold between 2008 and 2018. On March 23, 2022, the court entered judgment in our favor on all claims and closed the case. On April 20, 2022, ParkerVision filed a notice of appeal to the United States Court of Appeals for the Federal Circuit. A hearing on the appeal is scheduled for November 6, 2023. We intend to continue to vigorously defend ourselves in this matter. Arm Ltd. v. QUALCOMM Incorporated: On August 31, 2022, Arm Ltd. (ARM) filed a complaint against us in the United States District Court for the District of Delaware. Our subsidiaries Qualcomm Technologies, Inc. and NuVia, Inc. (Nuvia) are also named in the complaint. The complaint alleges that following our acquisition of Nuvia, we and Nuvia breached Nuvia’s Architecture License Agreement with ARM (the Nuvia ALA) by failing to comply with the termination obligations under the Nuvia ALA. The complaint seeks specific performance, including that we cease all use of and destroy any technology that was developed under the Nuvia ALA, including processor core technology. ARM also contends that we violated the Lanham Act through trademark infringement and false designation of origin through unauthorized use of ARM’s F-23 QUALCOMM Incorporated NOTES TO CONSOLIDATED FINANCIAL STATEMENTS trademarks and seeks associated injunctive and declaratory relief. ARM further seeks exemplary or punitive damages, costs, expenses and reasonable attorney’s fees, and equitable relief addressing any infringement occurring after entry of judgment. On September 30, 2022, we filed our Answer and Counterclaim in response to ARM’s complaint denying ARM’s claims. Our counterclaim seeks a declaratory judgment that we did not breach the Nuvia ALA or the Technology License Agreement between Nuvia and ARM and that, following the acquisition of Nuvia, our architected cores (including all further developments, iterations or instantiations of the technology we acquired from Nuvia), server System-on-Chip (SoC) and compute SoC are fully licensed under our existing Architecture License Agreement and Technology License Agreement with ARM (the ARM-Qualcomm Agreements). We further seek an order enjoining ARM from making any claim that our products are not licensed under the ARM-Qualcomm Agreements, are not ARM-compliant or that we are prohibited from using ARM’s marks in the marketing of any such products. On October 26, 2022, we filed an Amended Counterclaim seeking additional declaratory relief that certain statements ARM is making in the marketplace concerning our rights under the ARM-Qualcomm Agreements are false, and that ARM has no right to prevent us from shipping our products, which are validly licensed. Trial is scheduled to begin on September 23, 2024. We intend to continue to vigorously defend ourselves in this matter. Contingent Losses and Other Considerations: Litigation and investigations are inherently uncertain, and we face difficulties in evaluating or estimating likely outcomes or ranges of possible loss, particularly in antitrust and trade regulation investigations. We have no t recorded any accrual at September 24, 2023 for contingent losses associated with the pending matters described above based on our belief that losses, while reasonably possible, are not probable. Further, any possible amount or range of loss cannot be reasonably estimated at this time. The unfavorable resolution of one or more of these matters could have a material adverse effect on our business, results of operations, financial condition or cash flows. We are engaged in numerous other legal actions not described above (for example, our 2010 European Commission matter relating to the Icera complaint, and other matters arising in the ordinary course of our business, including those relating to employment matters or the initiation or defense of proceedings relating to intellectual property rights) and, while there can be no assurance, we believe that the ultimate outcome of these other legal actions will not have a material adverse effect on our business, results of operations, financial condition or cash flows. Indemnifications . We generally do not indemnify our customers, licensees and suppliers for losses sustained from infringement of third-party intellectual property rights. However, we are contingently liable under certain agreements to defend and/or indemnify certain customers, licensees, and suppliers against certain types of liability and/or damages arising from the infringement of third-party intellectual property rights and companies that purchase businesses we previously consolidated against certain contingent losses. Our obligations under these agreements may be limited in terms of time and/or amounts, and in some instances, we may have recourse against third parties for certain payments made by us. Claims and reimbursements under indemnification arrangements have not been material to our consolidated financial statements. We have not recorded accruals for certain claims under indemnification arrangements based on our belief that additional liabilities, while possible, are not probable. Further, any possible range of loss cannot be reasonably estimated at this time. Purchase Obligations . We have agreements with suppliers and other parties to purchase inventory, other goods and services and long-lived assets. Such agreements include multi-year capacity purchase commitments with certain suppliers of our integrated circuit products. Total advance payments related to multi-year capacity purchase commitments recorded on the consolidated balance sheets at September 24, 2023 and September 25, 2022 were $ 3.3 billion and $ 3.8 billion, respectively, of which $ 404 million and $ 701 million were recorded in other current assets, respectively, and $ 2.9 billion and $ 3.1 billion were recorded in other assets, respectively. Integrated circuit product inventory obligations represent purchase commitments (including those under multi-year capacity purchase commitments to the extent such minimum amounts are both fixed and determinable) for raw materials, semiconductor die, finished goods and manufacturing services, such as wafer bump, probe, assembly and final test. Under our manufacturing relationships with our foundry suppliers and assembly and test service providers, cancellation of outstanding purchase commitments is generally allowed but would require payment of costs incurred through the date of cancellation. Also, in some cases, we may be subject to incremental fees and/or the loss of amounts paid in advance due to capacity underutilization and/or the failure to meet minimum purchase volumes under multi-year capacity purchase commitments. Obligations under our purchase agreements, which primarily relate to integrated circuit product inventory obligations, at September 24, 2023 totaled $ 12.2 billion of which, $ 6.8 billion is expected to be paid in the next 12 months. Operating Leases. We lease certain of our land, facilities and equipment under operating leases, with terms ranging from less than one year to 20 years, some of which include options to extend for up to 20 years. At September 24, 2023 and September 25, 2022, the weighted-average remaining lease term for operating leases was eight years . Operating lease expense for fiscal 2023, 2022 and 2021 was $ 204 million, $ 207 million and $ 203 million, respectively. At September 24, 2023, other assets included $ 612 million of operating lease assets, with corresponding lease liabilities of $ 98 million recorded in other current liabilities and $ 571 million recorded in other liabilities . At September 25, 2022, other assets included $ 631 million of operating lease assets, with corresponding lease liabilities of $ 104 million recorded in other current liabilities and $ 573 million recorded in other liabilities. F-24 QUALCOMM Incorporated NOTES TO CONSOLIDATED FINANCIAL STATEMENTS At September 24, 2023, future lease payments under our operating leases were as follows (in millions): September 24, 2023 2024 $ 116 2025 111 2026 104 2027 100 2028 83 Thereafter 358 Total future lease payments 872 Imputed interest ( 203 ) Total lease liability balance $ 669 Note 8. Segment Information We are organized on the basis of products and services and have three reportable segments. Our operating segments reflect the way our businesses and management/reporting structure are organized internally and the way our Chief Operating Decision Maker (CODM), who is our CEO, reviews financial information, makes operating decisions and assesses business performance. We also consider, among other items, the way budgets and forecasts are prepared and reviewed and the basis on which executive compensation is determined, as well as the similarities and the level of centralized resource planning within our operating segments, such as the nature of products, the level of shared products, technology and other resources, production processes and customer base. We conduct business primarily through our QCT semiconductor business and our QTL licensing business. QCT develops and supplies integrated circuits and system software based on 3G/4G/5G and other technologies, including RFFE, for use in mobile devices; automotive systems for connectivity, digital cockpit and ADAS/AD; and IoT including consumer electronic devices; industrial devices; and edge networking products. QTL grants licenses or otherwise provides rights to use portions of our intellectual property portfolio, which includes certain patent rights essential to and/or useful in the manufacture and sale of certain wireless products. Our QSI (Qualcomm Strategic Initiatives) reportable segment makes strategic investments. We also have nonreportable segments, including QGOV (Qualcomm Government Technologies) and our cloud computing processing initiative (formerly referred to as our cloud AI inference processing initiative). Our CODM allocates resources to and evaluates the performance of our segments based on revenues and earnings (loss) before income taxes (EBT). Segment EBT includes the allocation of certain corporate expenses to the segments, including depreciation and amortization expense related to certain corporate assets. Certain income and charges are not allocated to segments in our management reports because they are not considered in evaluating the segments’ operating performance. Unallocated income and charges include certain interest expense, certain net investment income, certain share-based compensation, gains and losses on our deferred compensation plan liabilities and related assets and certain research and development expenses, certain selling, general and administrative expenses and other expenses or income that were deemed to be not directly related to the businesses of the segments. Additionally, unallocated charges include recognition of the step-up of inventories and property, plant and equipment to fair value, amortization of certain intangible assets and certain other acquisition-related charges, third-party acquisition and integration services costs and certain other items, which may include major restructuring and restructuring-related costs, asset impairment charges and awards, settlements and/or damages arising from legal or regulatory matters. Our CODM does not evaluate our operating segments using discrete asset information. F-25 QUALCOMM Incorporated NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The table below presents revenues and EBT for reportable segments (in millions): 2023 2022 2021 Revenues: QCT $ 30,382 $ 37,677 $ 27,019 QTL 5,306 6,358 6,320 QSI 28 31 45 Reconciling items 104 134 182 Total $ 35,820 $ 44,200 $ 33,566 EBT: QCT $ 7,924 $ 12,837 $ 7,763 QTL 3,628 4,628 4,627 QSI ( 12 ) ( 279 ) 916 Reconciling items ( 4,097 ) ( 2,188 ) ( 3,032 ) Total $ 7,443 $ 14,998 $ 10,274 Reconciling items for revenues and EBT in the previous table were as follows (in millions): 2023 2022 2021 Revenues: Nonreportable segments $ 144 $ 134 $ 128 Unallocated revenues ( 40 ) — 54 $ 104 $ 134 $ 182 EBT: Unallocated revenues $ ( 40 ) $ — $ 54 Unallocated cost of revenues ( 205 ) ( 266 ) ( 277 ) Unallocated research and development expenses ( 2,034 ) ( 1,767 ) ( 1,820 ) Unallocated selling, general and administrative expenses ( 588 ) ( 609 ) ( 538 ) Unallocated other (expense) income (Note 2) ( 862 ) 1,059 — Unallocated interest expense ( 694 ) ( 490 ) ( 559 ) Unallocated investment and other income (expense), net 364 ( 91 ) 166 Nonreportable segments ( 38 ) ( 24 ) ( 58 ) $ ( 4,097 ) $ ( 2,188 ) $ ( 3,032 ) The net book value of long-lived tangible assets located outside of the U.S. (the majority of which is located in Taiwan and the rest of the Asia-Pacific region) was $ 3.6 billion and $ 3.5 billion at September 24, 2023 and September 25, 2022, respectively. The net book value of long-lived tangible assets located in the U.S. was $ 2.0 billion and $ 2.3 billion at September 24, 2023 and September 25, 2022, respectively. F-26 QUALCOMM Incorporated NOTES TO CONSOLIDATED FINANCIAL STATEMENTS We report revenues from external customers by country based on the location to which our products or services are delivered, which for QCT is generally the country in which our customers manufacture their products, and for licensing revenues, the invoiced addresses of our licensees. As a result, the revenues by country presented herein are not necessarily indicative of either the country in which the devices containing our products and/or intellectual property are ultimately sold to consumers or the country in which the companies that sell the devices are headquartered. For example, China revenues could include revenues related to shipments of integrated circuits for a company that is headquartered in South Korea but that manufactures devices in China, which devices are then sold to consumers in Europe and/or the United States. Revenues by country were as follows (in millions): 2023 2022 2021 China (including Hong Kong) $ 22,382 $ 28,119 $ 22,512 Vietnam 4,551 6,063 3,114 South Korea 3,272 3,164 2,368 United States 1,259 1,482 1,406 Other foreign 4,356 5,372 4,166 $ 35,820 $ 44,200 $ 33,566 Note 9. Acquisitions and Divestitures Veoneer. On October 4, 2021, we and SSW Partners, a New York-based investment partnership, entered into a definitive agreement to acquire Veoneer, Inc. (Veoneer). The transaction closed on April 1, 2022 (the Closing Date). Total cash consideration paid in the transaction was $ 4.7 billion, consisting of (i) $ 4.6 billion paid in respect of Veoneer’s outstanding capital stock and equity awards and amounts paid to settle Veoneer’s convertible senior notes (which were converted at the election of the note holders and settled in cash in the third quarter of fiscal 2022) and (ii) a $ 110 million termination fee paid to Magna International Inc. (Magna) in the first quarter of fiscal 2022. We funded substantially all of the cash consideration payable in the transaction in exchange for (i) the Arriver business (which SSW transferred to us shortly after the Closing Date) and (ii) the right to receive a majority of the proceeds upon the sale of the Non-Arriver businesses by SSW Partners. We intend to incorporate Arriver’s computer vision, drive policy and driver assistance technologies into our Snapdragon automotive platform to deliver an integrated software SoC ADAS platform for automakers and Tier-1 automotive suppliers. SSW Partners retained Veoneer’s Tier-1 automotive supplier businesses, primarily consisting of the Active Safety and the Restraint Control Systems businesses (the Non-Arriver businesses), with the intent to sell such businesses in multiple transactions. Although we do not own or operate the Non-Arriver businesses, we are the primary beneficiary, within the meaning of the Financial Accounting Standards Board (FASB) accounting guidance related to consolidation (ASC 810), of these businesses under the variable interest model, until sold by SSW. Factors considered in reaching this conclusion included, among others: (i) our involvement in the design of and our funding of substantially all of the total cash consideration payable in the transaction and (ii) our obligations to absorb losses and rights to receive returns from the Non-Arriver businesses. Accordingly, the assets and liabilities of the Non-Arriver businesses have been consolidated and presented as held for sale on our consolidated balance sheet, and the operating results have been presented as discontinued operations (through the date of disposition). Our accounting purchase price was approximately $ 4.3 billion, substantially all of which relates to our share of cash consideration at close for the outstanding common shares of Veoneer and the Magna termination fee and excludes Veoneer’s convertible senior notes that are reflected as an assumed liability. F-27 QUALCOMM Incorporated NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The allocation of the purchase price to the assets acquired and liabilities assumed based on their fair values was as follows (in millions): Cash $ 30 Current held for sale assets, net of costs to sell (1) 626 Completed technology-based intangible assets 349 In-process research and development (IPR&D) 298 Goodwill 2,793 Noncurrent held for sale assets (1) 1,186 Other assets 326 Total assets 5,608 Current held for sale liabilities (1) ( 677 ) Convertible senior notes ( 352 ) Noncurrent held for sale liabilities (1) ( 128 ) Other liabilities ( 200 ) Total liabilities ( 1,357 ) Net assets acquired $ 4,251 (1) Held for sale assets and liabilities relate to the Non-Arriver businesses and were measured at fair value less costs to sell (including SSW Partners’ estimated return with respect to the sale proceeds of the Non-Arriver businesses), which was estimated using a market approach based on significant inputs that were not observable. The Non-Arriver businesses’ assets are not available to be used to settle our obligations, and the Non-Arriver businesses’ creditors do not have recourse to us. SSW Partners’ funding of the purchase price for Veoneer was recorded as a component of held for sale liabilities. The underlying classes of assets and liabilities held for sale have not been presented because such amounts are not material. Goodwill related to this transaction was allocated to our QCT segment, $ 471 million of which is expected to be deductible for tax purposes. Goodwill is primarily attributable to assembled workforce and certain synergies expected to arise after the acquisition. Completed technology-based intangible assets will be amortized on a straight-line basis over the weighted-average useful life of nine years . IPR&D relates to a single project that is expected to be completed in fiscal 2025. Upon completion, we expect the IPR&D to be amortized over its useful life of seven years . We valued the completed technology and IPR&D using an income approach based on significant unobservable inputs. Pro forma results of operations have not been presented because the effects of this acquisition were not material to our consolidated results of operations. Since the Closing Date, the operating results of the Arriver and Non-Arriver businesses were initially reported on a one quarter lag. During the fourth quarter of fiscal 2022, we eliminated the one-quarter reporting lag previously used to consolidate the Arriver business to provide contemporaneous reporting within our consolidated financial statements, which we believe is preferable. The effect of this change was not material to our consolidated financial statements, and the impact of eliminating the one quarter reporting lag has been included in our operating results in the fourth quarter of fiscal 2022. On June 1, 2023, SSW Partners completed the sale of the Active Safety business to Magna for net cash proceeds of $ 1.5 billion. We expect that SSW Partners will complete the sale of the Restraint Control Systems business within calendar 2023, subject to any required regulatory approvals and other closing conditions being met. Discontinued operations for fiscal 2023 included a gain on the sale of the Active Safety business and certain write-down charges related to the Restraint Control Systems business, based on the expected sales price, the individual and aggregate amounts of which were not material. The Restraint Control Systems business continues to be presented as discontinued operations on a one quarter reporting lag. The cash flows provided (used) by the Non-Arriver businesses are reflected as discontinued operations and are classified as operating, investing (which includes cash proceeds from the sale of the Active Safety business) and financing activities in the consolidated statements of cash flows. F-28 QUALCOMM Incorporated NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 10. Fair Value Measurements and Marketable Securities The following table presents our fair value hierarchy for assets and liabilities measured at fair value on a recurring basis at September 24, 2023 (in millions): Level 1 Level 2 Level 3 Total Assets: Cash equivalents $ 5,335 $ 1,819 $ — $ 7,154 Marketable securities: Corporate bonds and notes $ — $ 2,590 $ — $ 2,590 Mortgage- and asset-backed securities — 123 — 123 Equity securities 121 — — 121 U.S. Treasury securities and government-related securities 20 20 — 40 Total marketable securities 141 2,733 — 2,874 Derivative instruments — 32 — 32 Other investments 742 — 43 785 Total assets measured at fair value $ 6,218 $ 4,584 $ 43 $ 10,845 Liabilities: Derivative instruments $ — $ 317 $ — $ 317 Other liabilities 740 — — 740 Total liabilities measured at fair value $ 740 $ 317 $ — $ 1,057 At September 24, 2023 and September 25, 2022, our marketable securities were all classified as current and were primarily comprised of available-for-sale debt securities (substantially all of which were corporate bonds and notes). The contractual maturities of available-for-sale debt securities were as follows (in millions): September 24, 2023 Years to Maturity: Less than one year $ 1,321 One to five years 1,306 Five to ten years 3 No single maturity date 123 Total $ 2,753 Debt securities with no single maturity date included mortgage- and asset-backed securities. F-29 SCHEDULE II QUALCOMM Incorporated VALUATION AND QUALIFYING ACCOUNTS The table below details the activity of the valuation allowance on deferred tax assets for fiscal 2023, 2022 and 2021 (in millions): Balance at Beginning of Period Charged (Credited) to Costs and Expenses Other Balance at End of Period Year ended September 24, 2023 $ 2,223 $ ( 420 ) $ — $ 1,803 Year ended September 25, 2022 1,926 278 19 2,223 Year ended September 26, 2021 1,728 197 1 1,926 S-1