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0000320193
20151028
10-K
752
In addition, the Company has made prepayments to certain of its suppliers associated with long-term supply agreements to secure supply of inventory components.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
753
The Company records a write-down for inventories of components and products, including third-party products held for resale, which have become obsolete or are in excess of anticipated demand or net realizable value.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
754
The Company performs a detailed review of inventory that considers multiple factors including demand forecasts, product life cycle status, product development plans, current sales levels and component cost trends.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
755
The Company also reviews its manufacturing-related capital assets and inventory prepayments for impairment whenever events or circumstances indicate the carrying amount of such assets may not be recoverable.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
756
If the Company determines that an asset is not recoverable, it records an impairment loss equal to the amount by which the carrying value of such an asset exceeds its fair value.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
757
The industries in which the Company competes are subject to a rapid and unpredictable pace of product and component obsolescence and demand changes.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
758
In certain circumstances the Company may be required to record additional write-downs of inventory and/or manufacturing-related assets.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
759
These circumstances include future demand or market conditions for the Company’s products being less favorable than forecasted, unforeseen technological changes or changes to the Company’s product development plans that negatively impact the utility of any of these assets, or significant deterioration in the financial ...
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
760
Such write-downs would adversely affect the Company’s financial condition and operating results in the period when the write-downs were recorded.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
761
Apple Inc. | 2015 Form 10-K | 34 The Company accrues for estimated cancellation fees related to inventory orders that have been cancelled or are expected to be cancelled.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
762
Consistent with industry practice, the Company acquires components through a combination of purchase orders, supplier contracts, and open orders in each case based on projected demand.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
763
Where appropriate, the purchases are applied to inventory component prepayments that are outstanding with the respective supplier.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
764
Purchase commitments typically cover the Company’s forecasted component and manufacturing requirements for periods up to 150 days.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
765
If there is an abrupt and substantial decline in demand for one or more of the Company’s products, a change in the Company’s product development plans, or an unanticipated change in technological requirements for any of the Company’s products, the Company may be required to record additional accruals for cancellation f...
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
766
Warranty Costs The Company accrues for the estimated cost of warranties at the time the related revenue is recognized based on historical and projected warranty claim rates, historical and projected cost-per-claim and knowledge of specific product failures that are outside of the Company’s typical experience.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
767
The Company regularly reviews these estimates to assess the adequacy of its recorded warranty liabilities or the current installed base of products subject to warranty protection and adjusts the amounts as necessary.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
768
If actual product failure rates or repair costs differ from estimates, revisions to the estimated warranty liabilities would be required and could materially affect the Company’s financial condition and operating results.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
769
Income Taxes The Company records a tax provision for the anticipated tax consequences of its reported operating results.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
770
The provision for income taxes is computed using the asset and liability method, under which deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating losses and tax cred...
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
771
Deferred tax assets and liabilities are measured using the currently enacted tax rates that apply to taxable income in effect for the years in which those tax assets and liabilities are expected to be realized or settled.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
772
The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
773
The Company recognizes tax benefits from uncertain tax positions only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
774
The tax benefits recognized in the financial statements from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
775
Management believes it is more likely than not that forecasted income, including income that may be generated as a result of certain tax planning strategies, together with future reversals of existing taxable temporary differences, will be sufficient to fully recover the deferred tax assets.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
776
In the event that the Company determines all or part of the net deferred tax assets are not realizable in the future, the Company will record an adjustment to the valuation allowance that would be charged to earnings in the period such determination is made.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
777
In addition, the calculation of tax liabilities involves significant judgment in estimating the impact of uncertainties in the application of GAAP and complex tax laws.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
778
Resolution of these uncertainties in a manner inconsistent with management’s expectations could have a material impact on the Company’s financial condition and operating results.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
779
Legal and Other Contingencies As discussed in Part I, Item 3 of this Form 10-K under the heading “Legal Proceedings” and in Part II, Item 8 of this Form 10-K in the Notes to Consolidated Financial Statements in Note 10, “Commitments and Contingencies,” the Company is subject to various legal proceedings and claims that...
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
780
The Company records a liability when it is probable that a loss has been incurred and the amount is reasonably estimable.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
781
There is significant judgment required in both the probability determination and as to whether an exposure can be reasonably estimated.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
782
In the opinion of management, there was not at least a reasonable possibility the Company may have incurred a material loss, or a material loss in excess of a recorded accrual, with respect to loss contingencies for asserted legal and other claims.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
783
However, the outcome of legal proceedings and claims brought against the Company is subject to significant uncertainty.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
784
Therefore, although management considers the likelihood of such an outcome to be remote, if one or more of these legal matters were resolved against the Company in a reporting period for amounts in excess of management’s expectations, the Company’s consolidated financial statements for that reporting period could be ma...
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
785
Apple Inc. | 2015 Form 10-K | 35 Item 7A.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
786
Quantitative and Qualitative Disclosures About Market Risk Interest Rate and Foreign Currency Risk Management The Company regularly reviews its foreign exchange forward and option positions and interest rate swaps, both on a stand-alone basis and in conjunction with its underlying foreign currency and interest rate rel...
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
787
Given the effective horizons of the Company’s risk management activities and the anticipatory nature of the exposures, there can be no assurance these positions will offset more than a portion of the financial impact resulting from movements in either foreign exchange or interest rates.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
788
Further, the recognition of the gains and losses related to these instruments may not coincide with the timing of gains and losses related to the underlying economic exposures and, therefore, may adversely affect the Company’s financial condition and operating results.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
789
Interest Rate Risk The Company’s exposure to changes in interest rates relates primarily to the Company’s investment portfolio and outstanding debt.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
790
While the Company is exposed to global interest rate fluctuations, the Company’s interest income and expense are most sensitive to fluctuations in U.S. interest rates.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
791
Changes in U.S. interest rates affect the interest earned on the Company’s cash, cash equivalents and marketable securities and the fair value of those securities, as well as costs associated with hedging and interest paid on the Company’s debt.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
792
The Company’s investment policy and strategy are focused on preservation of capital and supporting the Company’s liquidity requirements.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
793
The Company uses a combination of internal and external management to execute its investment strategy and achieve its investment objectives.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
794
The Company typically invests in highly-rated securities, and its investment policy generally limits the amount of credit exposure to any one issuer.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
795
The policy requires investments generally to be investment grade, with the primary objective of minimizing the potential risk of principal loss.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
796
To provide a meaningful assessment of the interest rate risk associated with the Company’s investment portfolio, the Company performed a sensitivity analysis to determine the impact a change in interest rates would have on the value of the investment portfolio assuming a 100 basis point parallel shift in the yield curv...
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
797
Based on investment positions as of September 26, 2015 and September 27, 2014, a hypothetical 100 basis point increase in interest rates across all maturities would result in a $4.3 billion and $3.4 billion incremental decline in the fair market value of the portfolio, respectively.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
798
Such losses would only be realized if the Company sold the investments prior to maturity.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
799
As of September 26, 2015 and September 27, 2014, the Company had outstanding floating- and fixed-rate notes with varying maturities for an aggregate carrying amount of $56.0 billion and $29.0 billion, respectively.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
800
The Company has entered, and may enter in the future, into interest rate swaps to manage interest rate risk on its outstanding term debt.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
801
Interest rate swaps allow the Company to effectively convert fixed-rate payments into floating-rate payments or floating-rate payments into fixed-rate payments.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
802
Gains and losses on these instruments are generally offset by the corresponding losses and gains on the related hedging instrument.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
803
A 100 basis point increase in market interest rates would cause interest expense on the Company’s debt as of September 26, 2015 and September 27, 2014 to increase by $200 million and $110 million on an annualized basis, respectively.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
804
Further details regarding the Company’s debt is provided in Part II, Item 8 of this Form 10-K in the Notes to Consolidated Financial Statements in Note 6, “Debt.” Foreign Currency Risk In general, the Company is a net receiver of currencies other than the U.S. dollar.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
805
Accordingly, changes in exchange rates, and in particular a strengthening of the U.S. dollar, will negatively affect the Company’s net sales and gross margins as expressed in U.S. dollars.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
806
There is a risk that the Company will have to adjust local currency product pricing due to competitive pressures when there have been significant volatility in foreign currency exchange rates.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
807
The Company may enter into foreign currency forward and option contracts with financial institutions to protect against foreign exchange risks associated with certain existing assets and liabilities, certain firmly committed transactions, forecasted future cash flows and net investments in foreign subsidiaries.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
808
In addition, the Company has entered, and may enter in the future, into non-designated foreign currency contracts to partially offset the foreign currency exchange gains and losses on its foreign-denominated debt issuances.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
809
The Company’s practice is to hedge a portion of its material foreign exchange exposures, typically for up to 12 months.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
810
However, the Company may choose not to hedge certain foreign exchange exposures for a variety of reasons, including but not limited to accounting considerations and the prohibitive economic cost of hedging particular exposures.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
811
Apple Inc. | 2015 Form 10-K | 36 To provide a meaningful assessment of the foreign currency risk associated with certain of the Company’s foreign currency derivative positions, the Company performed a sensitivity analysis using a value-at-risk (“VAR”) model to assess the potential impact of fluctuations in exchange rat...
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
812
The VAR model consisted of using a Monte Carlo simulation to generate thousands of random market price paths assuming normal market conditions.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
813
The VAR is the maximum expected loss in fair value, for a given confidence interval, to the Company’s foreign currency derivative positions due to adverse movements in rates.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
814
The VAR model is not intended to represent actual losses but is used as a risk estimation and management tool.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
815
The model assumes normal market conditions.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
816
Forecasted transactions, firm commitments and assets and liabilities denominated in foreign currencies were excluded from the model.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
817
Based on the results of the model, the Company estimates with 95% confidence a maximum one-day loss in fair value of $342 million as of September 26, 2015 compared to a maximum one-day loss in fair value of $240 million as of September 27, 2014.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
818
Because the Company uses foreign currency instruments for hedging purposes, the loss in fair value incurred on those instruments are generally offset by increases in the fair value of the underlying exposures.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
819
Actual future gains and losses associated with the Company’s investment portfolio and derivative positions may differ materially from the sensitivity analyses performed as of September 26, 2015 due to the inherent limitations associated with predicting the timing and amount of changes in interest rates, foreign currenc...
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
820
Apple Inc. | 2015 Form 10-K | 37 Item 8.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
821
Financial Statements and Supplementary Data All financial statement schedules have been omitted, since the required information is not applicable or is not present in amounts sufficient to require submission of the schedule, or because the information required is included in the consolidated financial statements and no...
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
822
Apple Inc. | 2015 Form 10-K | 38 CONSOLIDATED STATEMENTS OF OPERATIONS (In millions, except number of shares which are reflected in thousands and per share amounts) See accompanying Notes to Consolidated Financial Statements.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
823
Apple Inc. | 2015 Form 10-K | 39 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In millions) See accompanying Notes to Consolidated Financial Statements.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
824
Apple Inc. | 2015 Form 10-K | 40 CONSOLIDATED BALANCE SHEETS (In millions, except number of shares which are reflected in thousands and par value) See accompanying Notes to Consolidated Financial Statements.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
825
Apple Inc. | 2015 Form 10-K | 41 CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (In millions, except number of shares which are reflected in thousands) See accompanying Notes to Consolidated Financial Statements.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
826
Apple Inc. | 2015 Form 10-K | 42 CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions) See accompanying Notes to Consolidated Financial Statements.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
827
Apple Inc. | 2015 Form 10-K | 43 Notes to Consolidated Financial Statements Note 1 - Summary of Significant Accounting Policies Apple Inc. and its wholly-owned subsidiaries (collectively “Apple” or the “Company”) designs, manufactures and markets mobile communication and media devices, personal computers and portable d...
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
828
The Company sells its products worldwide through its retail stores, online stores and direct sales force, as well as through third-party cellular network carriers, wholesalers, retailers and value-added resellers.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
829
In addition, the Company sells a variety of third-party Apple-compatible products, including application software and various accessories through its online and retail stores.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
830
The Company sells to consumers, small and mid-sized businesses and education, enterprise and government customers.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
831
Basis of Presentation and Preparation The accompanying consolidated financial statements include the accounts of the Company.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
832
Intercompany accounts and transactions have been eliminated.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
833
In the opinion of the Company’s management, the consolidated financial statements reflect all adjustments, which are normal and recurring in nature, necessary for fair financial statement presentation.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
834
The preparation of these consolidated financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in these consolidated financial statements and accompanying notes.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
835
Actual results could differ materially from those estimates.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
836
The Company’s fiscal year is the 52 or 53-week period that ends on the last Saturday of September.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
837
The Company’s fiscal years 2015, 2014 and 2013 ended on September 26, 2015, September 27, 2014 and September 28, 2013, respectively.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
838
An additional week is included in the first fiscal quarter approximately every six years to realign fiscal quarters with calendar quarters.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
839
Fiscal years 2015, 2014 and 2013 each spanned 52 weeks.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
840
Unless otherwise stated, references to particular years, quarters, months and periods refer to the Company’s fiscal years ended in September and the associated quarters, months and periods of those fiscal years.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
841
Revenue Recognition Net sales consist primarily of revenue from the sale of hardware, software, digital content and applications, accessories, and service and support contracts.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
842
The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed or determinable and collection is probable.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
843
Product is considered delivered to the customer once it has been shipped and title, risk of loss and rewards of ownership have been transferred.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
844
For most of the Company’s product sales, these criteria are met at the time the product is shipped.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
845
For online sales to individuals, for some sales to education customers in the U.S., and for certain other sales, the Company defers revenue until the customer receives the product because the Company retains a portion of the risk of loss on these sales during transit.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
846
For payment terms in excess of the Company’s standard payment terms, revenue is recognized as payments become due unless the Company has positive evidence that the sales price is fixed or determinable, such as a successful history of collection, without concession, on comparable arrangements.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
847
The Company recognizes revenue from the sale of hardware products, software bundled with hardware that is essential to the functionality of the hardware and third-party digital content sold on the iTunes Store in accordance with general revenue recognition accounting guidance.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
848
The Company recognizes revenue in accordance with industry specific software accounting guidance for the following types of sales transactions: (i) standalone sales of software products, (ii) sales of software upgrades and (iii) sales of software bundled with hardware not essential to the functionality of the hardware.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
849
For the sale of most third-party products, the Company recognizes revenue based on the gross amount billed to customers because the Company establishes its own pricing for such products, retains related inventory risk for physical products, is the primary obligor to the customer and assumes the credit risk for amounts ...
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
850
For third-party applications sold through the App Store and Mac App Store and certain digital content sold through the iTunes Store, the Company does not determine the selling price of the products and is not the primary obligor to the customer.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
851
Therefore, the Company accounts for such sales on a net basis by recognizing in net sales only the commission it retains from each sale.
0001193125-15-356351/full-submission.txt