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0000320193
20161026
10-K
638
2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (“ASU 2016-08”); ASU No.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
639
2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing (“ASU 2016-10”); and ASU No.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
640
2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients (“ASU 2016-12”).
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
641
The Company must adopt ASU 2016-08, ASU 2016-10 and ASU 2016-12 with ASU 2014-09 (collectively, the “new revenue standards”).
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
642
The new revenue standards may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of adoption.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
643
The Company currently expects to adopt the new revenue standards in its first quarter of 2018 utilizing the full retrospective transition method.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
644
The Company does not expect adoption of the new revenue standards to have a material impact on its consolidated financial statements.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
645
Liquidity and Capital Resources The following table presents selected financial information and statistics as of and for the years ended September 24, 2016, September 26, 2015 and September 27, 2014 (in millions): The Company believes its existing balances of cash, cash equivalents and marketable securities will be suf...
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
646
The Company currently anticipates the cash used for future dividends, the share repurchase program and debt repayments will come from its current domestic cash, cash generated from on-going U.S. operating activities and from borrowings.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
647
Apple Inc. | 2016 Form 10-K | 29 As of September 24, 2016 and September 26, 2015, the Company’s cash, cash equivalents and marketable securities held by foreign subsidiaries were $216.0 billion and $186.9 billion, respectively, and are generally based in U.S. dollar-denominated holdings.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
648
Amounts held by foreign subsidiaries are generally subject to U.S. income taxation on repatriation to the U.S.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
649
In connection with the State Aid Decision, the European Commission announced a recovery amount of up to €13 billion, plus interest.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
650
The actual amount of additional taxes subject to recovery is to be calculated by Ireland in accordance with the European Commission's guidance.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
651
Once the recovery amount is computed by Ireland, the Company anticipates funding it, including interest, out of foreign cash into escrow, pending conclusion of all appeals.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
652
The Company’s marketable securities investment portfolio is invested primarily in highly-rated securities and its investment policy generally limits the amount of credit exposure to any one issuer.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
653
The policy requires investments generally to be investment grade with the objective of minimizing the potential risk of principal loss.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
654
During 2016, cash generated from operating activities of $65.8 billion was a result of $45.7 billion of net income, non-cash adjustments to net income of $19.7 billion and an increase in the net change in operating assets and liabilities of $484 million.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
655
Cash used in investing activities of $46.0 billion during 2016 consisted primarily of cash used for purchases of marketable securities, net of sales and maturities, of $30.6 billion and cash used to acquire property, plant and equipment of $12.7 billion.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
656
Cash used in financing activities of $20.5 billion during 2016 consisted primarily of cash used to repurchase common stock of $29.7 billion, cash used to pay dividends and dividend equivalents of $12.2 billion and cash used to repay term debt of $2.5 billion, partially offset by net proceeds from the issuance of term d...
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
657
During 2015, cash generated from operating activities of $81.3 billion was a result of $53.4 billion of net income, non-cash adjustments to net income of $16.2 billion and an increase in the net change in operating assets and liabilities of $11.6 billion.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
658
Cash used in investing activities of $56.3 billion during 2015 consisted primarily of cash used for purchases of marketable securities, net of sales and maturities, of $44.4 billion and cash used to acquire property, plant and equipment of $11.2 billion.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
659
Cash used in financing activities of $17.7 billion during 2015 consisted primarily of cash used to repurchase common stock of $35.3 billion and cash used to pay dividends and dividend equivalents of $11.6 billion, partially offset by net proceeds from the issuance of term debt of $27.1 billion.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
660
Capital Assets The Company’s capital expenditures were $12.8 billion during 2016.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
661
The Company anticipates utilizing approximately $16.0 billion for capital expenditures during 2017, which includes product tooling and manufacturing process equipment; data centers; corporate facilities and infrastructure, including information systems hardware, software and enhancements; and retail store facilities.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
662
Debt The Company issues unsecured short-term promissory notes (“Commercial Paper”) pursuant to a commercial paper program.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
663
The Company uses the net proceeds from the commercial paper program for general corporate purposes, including dividends and share repurchases.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
664
As of September 24, 2016, the Company had $8.1 billion of Commercial Paper outstanding, with a weighted-average interest rate of 0.45% and maturities generally less than nine months.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
665
As of September 24, 2016, the Company has outstanding floating- and fixed-rate notes with varying maturities for an aggregate principal amount of $78.4 billion (collectively the “Notes”).
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
666
During 2016, the Company repaid $2.5 billion of its Notes upon maturity.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
667
The Company has entered, and in the future may enter, into interest rate swaps to manage interest rate risk on the Notes.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
668
In addition, the Company has entered, and in the future may enter, into currency swaps to manage foreign currency risk on the Notes.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
669
The future principal payments for the Company’s Notes as of September 24, 2016 are as follows (in millions): Further information regarding the Company’s debt issuances and related hedging activity can be found in Part II, Item 8 of this Form 10-K in the Notes to the Consolidated Financial Statements in Note 2, “Financi...
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
670
Additionally in April 2016, the Company announced that the Board of Directors raised the rate of the Company's quarterly cash dividend by 10% from $0.52 to $0.57 per share, beginning with the dividend paid during the third quarter of 2016.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
671
The Company intends to increase its dividend on an annual basis subject to declaration by the Board of Directors.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
672
As of September 24, 2016, $133 billion of the share repurchase program has been utilized.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
673
The Company’s share repurchase program does not obligate it to acquire any specific number of shares.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
674
Under the program, shares may be repurchased in privately negotiated or open market transactions, including under plans complying with Rule 10b5-1 under the Exchange Act.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
675
The following table presents the Company’s dividends, dividend equivalents, share repurchases and net share settlement activity from the start of the capital return program in August 2012 through September 24, 2016 (in millions): The Company expects to execute its capital return program by the end of March 2018 by payi...
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
676
The Company plans to continue to access the domestic and international debt markets to assist in funding its capital return program.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
677
Off-Balance Sheet Arrangements and Contractual Obligations The Company has not entered into any transactions with unconsolidated entities whereby the Company has financial guarantees, subordinated retained interests, derivative instruments, or other contingent arrangements that expose the Company to material continuing...
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
678
The following table presents certain payments due by the Company under contractual obligations with minimum firm commitments as of September 24, 2016, and excludes amounts already recorded on the Consolidated Balance Sheet, except for term debt (in millions): Operating Leases As of September 24, 2016, the Company’s tot...
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
679
The Company’s retail store and other facility leases are typically for terms not exceeding 10 years and generally contain multi-year renewal options.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
680
Apple Inc. | 2016 Form 10-K | 31 Manufacturing Purchase Obligations The Company utilizes several outsourcing partners to manufacture sub-assemblies for the Company’s products and to perform final assembly and testing of finished products.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
681
These outsourcing partners acquire components and build product based on demand information supplied by the Company, which typically covers periods up to 150 days.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
682
The Company also obtains individual components for its products from a wide variety of individual suppliers.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
683
Consistent with industry practice, the Company acquires components through a combination of purchase orders, supplier contracts, and open orders based on projected demand information.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
684
As of September 24, 2016, the Company had manufacturing purchase obligations of $28.6 billion.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
685
Other Purchase Obligations The Company’s other purchase obligations were comprised of commitments to acquire capital assets, including product tooling and manufacturing process equipment, and commitments related to advertising, licensing, R&D, internet and telecommunications services, energy and other obligations.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
686
As of September 24, 2016, the Company had other purchase obligations of $6.6 billion.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
687
The Company’s other non-current liabilities in the Consolidated Balance Sheets consist primarily of deferred tax liabilities, gross unrecognized tax benefits and the related gross interest and penalties.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
688
As of September 24, 2016, the Company had non-current deferred tax liabilities of $26.0 billion.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
689
Additionally, as of September 24, 2016, the Company had gross unrecognized tax benefits of $7.7 billion and an additional $1.0 billion for gross interest and penalties classified as non-current liabilities.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
690
At this time, the Company is unable to make a reasonably reliable estimate of the timing of payments due to uncertainties in the timing of tax audit outcomes; therefore, such amounts are not included in the above contractual obligation table.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
691
Indemnification The Company generally does not indemnify end-users of its operating system and application software against legal claims that the software infringes third-party intellectual property rights.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
692
Other agreements entered into by the Company sometimes include indemnification provisions under which the Company could be subject to costs and/or damages in the event of an infringement claim against the Company or an indemnified third-party.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
693
In the opinion of management, there was not at least a reasonable possibility the Company may have incurred a material loss with respect to indemnification of end-users of its operating system or application software for infringement of third-party intellectual property rights.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
694
The Company offers an iPhone Upgrade Program, which is available to customers who purchase a qualifying iPhone in the U.S., the U.K. and mainland China.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
695
The iPhone Upgrade Program provides customers the right to trade in that iPhone for a specified amount when purchasing a new iPhone, provided certain conditions are met.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
696
The Company accounts for the trade-in right as a guarantee liability and recognizes arrangement revenue net of the fair value of such right with subsequent changes to the guarantee liability recognized within revenue.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
697
The Company has entered into indemnification agreements with its directors and executive officers.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
698
Under these agreements, the Company has agreed to indemnify such individuals to the fullest extent permitted by law against liabilities that arise by reason of their status as directors or officers and to advance expenses incurred by such individuals in connection with related legal proceedings.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
699
It is not possible to determine the maximum potential amount of payments the Company could be required to make under these agreements due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each claim.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
700
However, the Company maintains directors and officers liability insurance coverage to reduce its exposure to such obligations.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
701
Critical Accounting Policies and Estimates The preparation of financial statements and related disclosures in conformity with U.S. generally accepted accounting principles (“GAAP”) and the Company’s discussion and analysis of its financial condition and operating results require the Company’s management to make judgmen...
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
702
Note 1, “Summary of Significant Accounting Policies,” of the Notes to Consolidated Financial Statements in Part II, Item 8 of this Form 10-K describes the significant accounting policies and methods used in the preparation of the Company’s consolidated financial statements.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
703
Management bases its estimates on historical experience and on various other assumptions it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
704
Actual results may differ from these estimates, and such differences may be material.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
705
Management believes the Company’s critical accounting policies and estimates are those related to revenue recognition, valuation and impairment of marketable securities, inventory valuation, valuation of manufacturing-related assets and estimation of purchase commitment cancellation fees, warranty costs, income taxes, ...
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
706
Management considers these policies critical because they are both important to the portrayal of the Company’s financial condition and operating results, and they require management to make judgments and estimates about inherently uncertain matters.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
707
The Company’s senior management has reviewed these critical accounting policies and related disclosures with the Audit and Finance Committee of the Company’s Board of Directors.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
708
Apple Inc. | 2016 Form 10-K | 32 Revenue Recognition Net sales consist primarily of revenue from the sale of hardware, software, digital content and applications, accessories, and service and support contracts.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
709
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.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
710
Product is considered delivered to the customer once it has been shipped and title, risk of loss and rewards of ownership have been transferred.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
711
For most of the Company’s product sales, these criteria are met at the time the product is shipped.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
712
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.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
713
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.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
714
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.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
715
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.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
716
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/or undelivered non-software services, the Company allocates revenue to all deliverables based on...
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
717
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”).
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
718
VSOE generally exists only when the Company sells the deliverable separately and is the price actually charged by the Company for that deliverable.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
719
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.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
720
For sales of qualifying versions of 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.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
721
Because the Company has neither VSOE nor TPE for the unspecified software upgrade rights or the non-software services, revenue is allocated to these rights and services based on the Company’s ESPs.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
722
Revenue allocated to the unspecified software upgrade rights and non-software services based on the Company’s ESPs 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.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
723
The Company’s process for determining ESPs involves management’s judgment and considers multiple factors that may vary over time depending upon the unique facts and circumstances related to each deliverable.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
724
Should future facts and circumstances change, the Company’s ESPs and the future rate of related amortization for unspecified software upgrades and non-software services related to future sales of these devices could change.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
725
Factors subject to change include the unspecified software upgrade rights and non-software services offered, the estimated value of unspecified software upgrade rights and non-software services and the estimated period unspecified software upgrades and non-software services are expected to be provided.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
726
The Company records reductions to revenue for estimated commitments related to price protection and other customer incentive programs.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
727
For transactions involving price protection, the Company recognizes revenue net of the estimated amount to be refunded, provided the refund amount can be reasonably and reliably estimated and the other conditions for revenue recognition have been met.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
728
The Company’s policy requires that, if refunds cannot be reliably estimated, revenue is not recognized until reliable estimates can be made or the price protection lapses.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
729
For the Company’s other customer incentive programs, the estimated cost 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.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
730
The Company also records reductions to revenue for expected future product returns based on the Company’s historical experience.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
731
Future market conditions and product transitions may require the Company to increase customer incentive programs that could result in reductions to future revenue.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
732
Additionally, certain customer incentive programs require management to estimate the number of customers who will actually redeem the incentive.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
733
Management’s estimates are based on historical experience and the specific terms and conditions of particular incentive programs.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
734
If a greater than estimated proportion of customers redeems such incentives, the Company would be required to record additional reductions to revenue, which would have an adverse impact on the Company’s operating results.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
735
Apple Inc. | 2016 Form 10-K | 33 Valuation and Impairment of Marketable Securities The Company’s investments in available-for-sale securities are reported at fair value.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
736
Unrealized gains and losses related to changes in the fair value of securities are recognized in accumulated other comprehensive income, net of tax, in the Company’s Consolidated Balance Sheets.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
737
Changes in the fair value of available-for-sale securities impact the Company’s net income only when such securities are sold or an other-than-temporary impairment is recognized.
0001628280-16-020309/full-submission.txt