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0000320193
20151028
10-K
852
The portion of the gross amount billed to customers that is remitted by the Company to third-party app developers and certain digital content owners is not reflected in the Company’s Consolidated Statements of Operations.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
853
Apple Inc. | 2015 Form 10-K | 44 The Company records deferred revenue when it receives payments in advance of the delivery of products or the performance of services.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
854
This includes amounts that have been deferred for unspecified and specified software upgrade rights and non-software services that are attached to hardware and software products.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
855
The Company sells gift cards redeemable at its retail and online stores, and also sells gift cards redeemable on iTunes Store, App Store, Mac App Store and iBooks Store for the purchase of digital content and software.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
856
The Company records deferred revenue upon the sale of the card, which is relieved upon redemption of the card by the customer.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
857
Revenue from AppleCare service and support contracts is deferred and recognized over the service coverage periods.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
858
AppleCare service and support contracts typically include extended phone support, repair services, web-based support resources and diagnostic tools offered under the Company’s standard limited warranty.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
859
The Company records reductions to revenue for estimated commitments related to price protection and other customer incentive programs.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
860
For transactions involving price protection, the Company recognizes revenue net of the estimated amount to be refunded.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
861
For the Company’s other customer incentive programs, the estimated cost of these programs is recognized at the later of the date at which the Company has sold the product or the date at which the program is offered.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
862
The Company also records reductions to revenue for expected future product returns based on the Company’s historical experience.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
863
Revenue is recorded net of taxes collected from customers that are remitted to governmental authorities, with the collected taxes recorded as current liabilities until remitted to the relevant government authority.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
864
Revenue Recognition for Arrangements with Multiple Deliverables For multi-element arrangements that include hardware products containing software essential to the hardware product’s functionality, undelivered software elements that relate to the hardware product’s essential software, and undelivered non-software servic...
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
865
In such circumstances, the Company uses a hierarchy to determine the selling price to be used for allocating revenue to deliverables: (i) vendor-specific objective evidence of fair value (“VSOE”), (ii) third-party evidence of selling price (“TPE”) and (iii) best estimate of selling price (“ESP”).
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
866
VSOE generally exists only when the Company sells the deliverable separately and is the price actually charged by the Company for that deliverable.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
867
ESPs reflect the Company’s best estimates of what the selling prices of elements would be if they were sold regularly on a stand-alone basis.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
868
For multi-element arrangements accounted for in accordance with industry specific software accounting guidance, the Company allocates revenue to all deliverables based on the VSOE of each element, and if VSOE does not exist revenue is recognized when elements lacking VSOE are delivered.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
869
For sales of qualifying versions of iPhone, iPad and iPod touch (“iOS devices”), Mac, Apple Watch and Apple TV, the Company has indicated it may from time to time provide future unspecified software upgrades to the device’s essential software and/or non-software services free of charge.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
870
The Company has identified up to three deliverables regularly included in arrangements involving the sale of these devices.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
871
The first deliverable, which represents the substantial portion of the allocated sales price, is the hardware and software essential to the functionality of the hardware device delivered at the time of sale.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
872
The second deliverable is the embedded right included with qualifying devices to receive on a when-and-if-available basis, future unspecified software upgrades relating to the product’s essential software.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
873
The third deliverable is the non-software services to be provided to qualifying devices.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
874
The Company allocates revenue between these deliverables using the relative selling price method.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
875
Because the Company has neither VSOE nor TPE for these deliverables, the allocation of revenue is based on the Company’s ESPs.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
876
Revenue allocated to the delivered hardware and the related essential software is recognized at the time of sale provided the other conditions for revenue recognition have been met.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
877
Revenue allocated to the embedded unspecified software upgrade rights and the non-software services is deferred and recognized on a straight-line basis over the estimated period the software upgrades and non-software services are expected to be provided.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
878
Cost of sales related to delivered hardware and related essential software, including estimated warranty costs, are recognized at the time of sale.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
879
Costs incurred to provide non-software services are recognized as cost of sales as incurred, and engineering and sales and marketing costs are recognized as operating expenses as incurred.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
880
The Company’s process for determining its ESP for deliverables without VSOE or TPE considers multiple factors that may vary depending upon the unique facts and circumstances related to each deliverable including, where applicable, prices charged by the Company and market trends in the pricing for similar offerings, pro...
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
881
Beginning in September 2015, the Company reduced the combined ESPs for iOS devices and Mac between $5 and $10 to reflect the increase in competitive offers for similar products at little to no cost for users, which reduces the amount the Company could reasonably charge for these deliverables on a standalone basis.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
882
Shipping Costs Amounts billed to customers related to shipping and handling are classified as revenue, and the Company’s shipping and handling costs are classified as cost of sales.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
883
Apple Inc. | 2015 Form 10-K | 45 Warranty Costs The Company generally provides for the estimated cost of hardware and software warranties at the time the related revenue is recognized.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
884
The Company assesses the adequacy of its accrued warranty liabilities and adjusts the amounts as necessary based on actual experience and changes in future estimates.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
885
Software Development Costs Research and development (“R&D”) costs are expensed as incurred.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
886
Development costs of computer software to be sold, leased, or otherwise marketed are subject to capitalization beginning when a product’s technological feasibility has been established and ending when a product is available for general release to customers.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
887
In most instances, the Company’s products are released soon after technological feasibility has been established and as a result software development costs were expensed as incurred.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
888
Advertising Costs Advertising costs are expensed as incurred and included in selling, general and administrative expenses.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
889
Advertising expense was $1.8 billion, $1.2 billion and $1.1 billion for 2015, 2014 and 2013, respectively.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
890
Share-based Compensation The Company recognizes expense related to share-based payment transactions in which it receives employee services in exchange for (a) equity instruments of the Company or (b) liabilities that are based on the fair value of the Company’s equity instruments or that may be settled by the issuance ...
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
891
Share-based compensation cost for restricted stock and restricted stock units (“RSUs”) is measured based on the closing fair market value of the Company’s common stock on the date of grant.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
892
The Company recognizes share-based compensation cost over the award’s requisite service period on a straight-line basis for time-based RSUs and on a graded basis for RSUs that are contingent on the achievement of performance conditions.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
893
The Company recognizes a benefit from share-based compensation in the Consolidated Statements of Shareholders’ Equity if an excess tax benefit is realized.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
894
In addition, the Company recognizes the indirect effects of share-based compensation on R&D tax credits, foreign tax credits and domestic manufacturing deductions in the Consolidated Statements of Operations.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
895
Further information regarding share-based compensation can be found in Note 9, “Benefit Plans.” Income Taxes 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 b...
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
896
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
897
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
898
The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not 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
899
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 settlement.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
900
See Note 5, “Income Taxes” for additional information.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
901
Earnings Per Share Basic earnings per share is computed by dividing income available to common shareholders by the weighted-average number of shares of common stock outstanding during the period.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
902
Diluted earnings per share is computed by dividing income available to common shareholders by the weighted-average number of shares of common stock outstanding during the period increased to include the number of additional shares of common stock that would have been outstanding if the potentially dilutive securities h...
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
903
Potentially dilutive securities include outstanding stock options, shares to be purchased under the Company’s employee stock purchase plan, unvested restricted stock and unvested RSUs.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
904
The dilutive effect of potentially dilutive securities is reflected in diluted earnings per share by application of the treasury stock method.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
905
Under the treasury stock method, an increase in the fair market value of the Company’s common stock can result in a greater dilutive effect from potentially dilutive securities.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
906
Apple Inc. | 2015 Form 10-K | 46 The following table shows the computation of basic and diluted earnings per share for 2015, 2014 and 2013 (net income in millions and shares in thousands): Potentially dilutive securities whose effect would have been antidilutive are excluded from the computation of diluted earnings per...
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
907
Financial Instruments Cash Equivalents and Marketable Securities All highly liquid investments with maturities of three months or less at the date of purchase are classified as cash equivalents.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
908
The Company’s marketable debt and equity securities have been classified and accounted for as available-for-sale.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
909
Management determines the appropriate classification of its investments at the time of purchase and reevaluates the classifications at each balance sheet date.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
910
The Company classifies its marketable debt securities as either short-term or long-term based on each instrument’s underlying contractual maturity date.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
911
Marketable debt securities with maturities of 12 months or less are classified as short-term and marketable debt securities with maturities greater than 12 months are classified as long-term.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
912
Marketable equity securities, including mutual funds, are classified as either short-term or long-term based on the nature of each security and its availability for use in current operations.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
913
The Company’s marketable debt and equity securities are carried at fair value, with unrealized gains and losses, net of taxes, reported as a component of accumulated other comprehensive income (“AOCI”) in shareholders’ equity, with the exception of unrealized losses believed to be other-than-temporary which are reporte...
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
914
The cost of securities sold is based upon the specific identification method.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
915
Derivative Financial Instruments The Company accounts for its derivative instruments as either assets or liabilities and carries them at fair value.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
916
For derivative instruments that hedge the exposure to variability in expected future cash flows that are designated as cash flow hedges, the effective portion of the gain or loss on the derivative instrument is reported as a component of AOCI in shareholders’ equity and reclassified into earnings in the same period or ...
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
917
The ineffective portion of the gain or loss on the derivative instrument, if any, is recognized in earnings in the current period.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
918
To receive hedge accounting treatment, cash flow hedges must be highly effective in offsetting changes to expected future cash flows on hedged transactions.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
919
For options designated as cash flow hedges, changes in the time value are excluded from the assessment of hedge effectiveness and are recognized in earnings.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
920
For derivative instruments that hedge the exposure to changes in the fair value of an asset or a liability and that are designated as fair value hedges, both the net gain or loss on the derivative instrument as well as the offsetting gain or loss on the hedged item are recognized in earnings in the current period.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
921
For derivative instruments and foreign currency debt that hedge the exposure to changes in foreign currency exchange rates used for translation of the net investment in a foreign operation and that are designated as a net investment hedge, the net gain or loss on the effective portion of the derivative instrument is re...
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
922
For forward exchange contracts designated as net investment hedges, the Company excludes changes in fair value relating to changes in the forward carry component from its definition of effectiveness.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
923
Accordingly, any gains or losses related to this forward carry component are recognized in earnings in the current period.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
924
Derivatives that do not qualify as hedges are adjusted to fair value through earnings in the current period.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
925
Apple Inc. | 2015 Form 10-K | 47 Allowance for Doubtful Accounts The Company records its allowance for doubtful accounts based upon its assessment of various factors, including historical experience, age of the accounts receivable balances, credit quality of the Company’s customers, current economic conditions and othe...
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
926
Inventories Inventories are stated at the lower of cost, computed using the first-in, first-out method and net realizable value.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
927
Any adjustments to reduce the cost of inventories to their net realizable value are recognized in earnings in the current period.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
928
As of September 26, 2015 and September 27, 2014, the Company’s inventories consist primarily of finished goods.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
929
Property, Plant and Equipment Property, plant and equipment are stated at cost.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
930
Depreciation is computed by use of the straight-line method over the estimated useful lives of the assets, which for buildings is the lesser of 30 years or the remaining life of the underlying building; between one to five years for machinery and equipment, including product tooling and manufacturing process equipment;...
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
931
The Company capitalizes eligible costs to acquire or develop internal-use software that are incurred subsequent to the preliminary project stage.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
932
Capitalized costs related to internal-use software are amortized using the straight-line method over the estimated useful lives of the assets, which range from three to five years.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
933
Depreciation and amortization expense on property and equipment was $9.2 billion, $6.9 billion and $5.8 billion during 2015, 2014 and 2013, respectively.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
934
Long-Lived Assets Including Goodwill and Other Acquired Intangible Assets The Company reviews property, plant and equipment, inventory component prepayments and certain identifiable intangibles, excluding goodwill, for impairment.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
935
Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
936
Recoverability of these assets is measured by comparison of their carrying amounts to future undiscounted cash flows the assets are expected to generate.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
937
If property, plant and equipment, inventory component prepayments and certain identifiable intangibles are considered to be impaired, the impairment to be recognized equals the amount by which the carrying value of the assets exceeds its fair value.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
938
The Company does not amortize goodwill and intangible assets with indefinite useful lives, rather such assets are required to be tested for impairment at least annually or sooner whenever events or changes in circumstances indicate that the assets may be impaired.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
939
The Company performs its goodwill and intangible asset impairment tests in the fourth quarter of each year.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
940
The Company did not recognize any impairment charges related to goodwill or indefinite lived intangible assets during 2015, 2014 and 2013.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
941
The Company established reporting units based on its current reporting structure.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
942
For purposes of testing goodwill for impairment, goodwill has been allocated to these reporting units to the extent it relates to each reporting unit.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
943
In 2015 and 2014, the Company’s goodwill was primarily allocated to the Americas and Europe reporting units.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
944
The Company amortizes its intangible assets with definite useful lives over their estimated useful lives and reviews these assets for impairment.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
945
The Company typically amortizes its acquired intangible assets with definite useful lives over periods from three to seven years.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
946
Fair Value Measurements The Company applies fair value accounting for all financial assets and liabilities and non-financial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
947
The Company defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
948
When determining the fair value measurements for assets and liabilities, which are required to be recorded at fair value, the Company considers the principal or most advantageous market in which the Company would transact and the market-based risk measurements or assumptions that market participants would use in pricin...
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
949
Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement: Level 1 - Quoted prices in active marke...
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
950
Level 2 - Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset...
0001193125-15-356351/full-submission.txt
0000320193
20151028
10-K
951
Level 3 - Inputs that are generally unobservable and typically reflect management’s estimate of assumptions that market participants would use in pricing the asset or liability.
0001193125-15-356351/full-submission.txt