Comments of QUALCOMM Incorporated on S7-16-02

QUALCOMM Incorporated
5775 Morehouse Drive
San Diego, California 92121-1714

VIA E-MAIL to rule-comments@sec.gov

July 15, 2002

Securities and Exchange Commission
450 Fifth Street N.W.
Washington, D.C. 20549-0609
Attn: Mr. Jonathan G. Katz, Secretary

Re: Proposed Rule; File No. S7-16-02 (the "Rule")

Ladies and Gentlemen:

QUALCOMM Incorporated ("QUALCOMM" or "we") is submitting this letter in response to the request of the United States Securities and Exchange Commission (the "Commission") in Release No. 33-8098 (May 10, 2002) (the "Release") for comments on proposals regarding disclosure in Management's Discussion and Analysis ("MD&A") about the application of critical accounting policies. QUALCOMM is a registrant under Section 12(g) of the Exchange Act. We have one class of stock outstanding, Common Stock, which currently trades on the Nasdaq National Market under the symbol "QCOM." Based on the number of shares outstanding as of April 22, 2002 and the closing price of QUALCOMM's common stock as of July 5, 2002, QUALCOMM has an approximate market capitalization of $22 billion.

Overall, QUALCOMM supports the Commission's intentions and goals in the Release. QUALCOMM concurs that additional disclosure regarding critical accounting estimates will improve the quality of information provided to investors. QUALCOMM is concerned, however, that compliance with certain aspects of the proposed Rule will be unduly burdensome, while providing little additional information to investors. The bases for our views on the proposed rule are set forth below.

I. Disclosure of the Significance of the Accounting Estimate

As set forth in the Release, companies would be required to disclose an explanation of the significance of the accounting estimate to a company's financial statements and, where material, an identification of the line items in the company's financial statements affected by the accounting estimate. QUALCOMM believes that disclosure of the specific line items directly affected by the accounting estimate could provide useful information to investors. However, disclosure relating to line items indirectly affected by the accounting estimate would be unduly burdensome on the company, while providing little useful information to investors. For example, an estimate affecting cost of sales will also indirectly affect operating expenses, operating income, income before income taxes, net income and basic and diluted earnings per share. In many instances, the indirect effect is repetitive of the direct effect. In respect to the effect on net income and earnings per share, the investor has information in the financial statements to calculate the effect in a sufficiently accurate manner.

Additionally, in the case of an estimate that exists at each balance sheet date, such as an accrual for warranty obligations, the Commission should clarify whether the significance of the accounting estimate to a company's changes in financial condition and results of operations is based on the amount of the estimate at the balance sheet date or on the effect of changes in the estimate from the prior period.

We suggest that the Commission modify the rules proposed in the Release to require disclosure of the significance of the accounting estimate to the specific line items directly affected and not to line items indirectly affected, such as net income and earnings per share. Also, we suggest that companies should not be required to separately address the impact of possible changes in the accounting estimate. Instead, we suggest that companies be required to disclose whether a particular estimate is subject to significant change in the near term as a result of an anticipated event.

II. Quantitative Discussion of Changes in Overall Financial Performance if the Company Were to Assume that the Accounting Estimate were Changed

As set forth in the Release, companies would be required to provide a quantitative discussion of changes in overall financial performance and line items in the financial statements if the company were to assume that the accounting estimate were changed, either (a) by using reasonably possible near-term changes in the most material assumption(s) underlying the accounting estimate or (b) by using the reasonably possible range of the accounting estimate. This disclosure would be unduly burdensome on companies, while providing little useful information to investors. Once substantive disclosure is made regarding the significance of an accounting estimate and the specific line items directly affected by the accounting estimate, the material effects of changes to the estimate should be evident to investors.

Certain estimates, such as those related to asset recoverability or impairment are not conducive to the type of quantitative discussion set forth in the Release. Asset impairment charges are rather infrequent and are not reasonably likely to change from period to period. Furthermore, providing meaningful quantitative information with respect to potential future impairments is not possible, as those amounts will be derived from specific facts and circumstances existing on a future date. For these types of estimates the quantitative discussion would address possible outcomes of 0% or 100% of the estimate. Such discussion would not provide useful information, and the effect of a 0% or 100% change to the estimate should be evident to investors. In the absence of specific anticipated events, it may be difficult or impossible to determine what reasonably possible near-term changes in an accounting estimate might occur.

At the same time, presentation of this type of sensitivity analysis for all line items affected would be repetitive and unduly burdensome on the company. The issue of administrative burden for companies is particularly important in light of the Commission's proposal to accelerate periodic reports filing dates. Although QUALCOMM's normal filing practice is already compliant with the proposed accelerated filing dates, we believe that the benefits of expanding disclosure requirements should be carefully weighed in respect to the potential impact on companies' abilities to meet or to continue to meet accelerated filing dates.

In lieu of detailed disclosure regarding the reasonably possible range of an estimate, we believe that the Commission could require disclosure of anticipated events that may subject a particular accounting estimate to significant change in the near term, and the significance of such change to financial statement line items that would be directly affected.

III. Statement of Discussion with the Audit Committee of the Board of Directors

As set forth in the Release, companies will need to provide a statement of whether or not a company's senior management has discussed the development and selection of the accounting estimate, and the related MD&A disclosure, with the company's audit committee. We agree that significant accounting estimates and related disclosure should be discussed with a company's audit committee. However, we believe that audit committees' responsibilities should be clearly defined in respect to the financial statements as a whole, as documented in their charters or as codified elsewhere, and that an audit committee's concurrence with individual balances in financial statements should not be presented in a piecemeal fashion within the MD&A. Identical statements regarding the discussion of each estimate do not provide valuable information to investors. Further, such statements may imply that other material items may not have been discussed in the same fashion with a company's audit committee.

If the Commission is concerned that appropriate discussions between companies' managements and audit committees are not taking place, definitive guidance regarding an audit committee's responsibilities would be more effective. Accordingly, we suggest that the audit committee's responsibilities be addressed, as appropriate, outside the scope of this proposed Rule.

IV. Conclusion

QUALCOMM endorses the Commission's efforts to provide more informative disclosure to investors regarding critical accounting estimates. We believe it is important for the efficient function of capital markets that the highest quality information be provided to investors. Notwithstanding, we are concerned with certain elements of the proposed Rule for the reasons we have specified above. We appreciate the opportunity to submit comments. We are available to meet with the Commission or the Staff and to respond to any questions.

Respectfully submitted,

QUALCOMM Incorporated

_______________________________
William E. Keitel
Senior Vice President and
Chief Financial Officer