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0000320193
20161026
10-K
738
Realized gains and losses on the sale of securities are determined by specific identification of each security’s cost basis.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
739
The Company regularly reviews its investment portfolio to determine if any security is other-than-temporarily impaired, which would require the Company to record an impairment charge in the period any such determination is made.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
740
In making this determination, the Company evaluates, among other things, the duration and extent to which the fair value of a security is less than its cost; the financial condition of the issuer and any changes thereto; and the Company’s intent to sell, or whether it will more likely than not be required to sell, the ...
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
741
The Company’s assessment of whether a security is other-than-temporarily impaired could change in the future due to new developments or changes in assumptions related to any particular security, which would have an adverse impact on the Company’s operating results.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
742
Inventory Valuation, Valuation of Manufacturing-Related Assets and Estimation of Purchase Commitment Cancellation Fees The Company must purchase components and build inventory in advance of product shipments and has invested in manufacturing-related assets, including capital assets held at its suppliers’ facilities.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
743
In addition, the Company has made prepayments to certain of its suppliers associated with long-term supply agreements to secure supply of inventory components.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
744
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.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
745
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.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
746
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.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
747
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.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
748
The industries in which the Company competes are subject to a rapid and unpredictable pace of product and component obsolescence and demand changes.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
749
In certain circumstances the Company may be required to record additional write-downs of inventory and/or impairments of manufacturing-related assets or inventory prepayments.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
750
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 ...
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
751
Such write-downs would adversely affect the Company’s financial condition and operating results in the period when the additional write-downs were recorded.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
752
The Company accrues for estimated purchase commitment cancellation fees related to inventory orders that have been cancelled or are expected to be cancelled.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
753
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.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
754
Manufacturing purchase obligations typically cover the Company’s forecasted component and manufacturing requirements for periods up to 150 days.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
755
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...
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
756
Warranty Costs The Company accrues for the estimated cost of warranties in the period 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.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
757
The Company regularly reviews these estimates and the current installed base of products subject to warranty protection to assess the appropriateness of its recorded warranty liabilities and adjusts the amounts as necessary.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
758
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.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
759
Apple Inc. | 2016 Form 10-K | 34 Income Taxes The Company records a tax provision for the anticipated tax consequences of its reported operating results.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
760
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...
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
761
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.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
762
The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
763
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.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
764
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.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
765
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.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
766
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.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
767
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.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
768
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.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
769
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...
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
770
The Company records a liability when it is probable that a loss has been incurred and the amount is reasonably estimable, the determination of which requires significant judgment.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
771
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.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
772
However, the outcome of legal proceedings and claims brought against the Company is subject to significant uncertainty.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
773
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...
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
774
Apple Inc. | 2016 Form 10-K | 35 Item 7A.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
775
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...
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
776
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.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
777
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.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
778
Interest Rate Risk The Company’s exposure to changes in interest rates relates primarily to the Company’s investment portfolio and outstanding debt.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
779
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.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
780
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.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
781
The Company’s investment policy and strategy are focused on preservation of capital and supporting the Company’s liquidity requirements.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
782
The Company uses a combination of internal and external management to execute its investment strategy and achieve its investment objectives.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
783
The Company typically invests 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
784
The policy requires investments generally to be investment grade, with the primary objective of minimizing the potential risk of principal loss.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
785
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...
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
786
Based on investment positions as of September 24, 2016 and September 26, 2015, a hypothetical 100 basis point increase in interest rates across all maturities would result in a $4.9 billion and $4.3 billion incremental decline in the fair market value of the portfolio, respectively.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
787
Such losses would only be realized if the Company sold the investments prior to maturity.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
788
As of September 24, 2016 and September 26, 2015, the Company had outstanding floating- and fixed-rate notes with varying maturities for an aggregate carrying amount of $78.9 billion and $55.8 billion, respectively.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
789
The Company has entered, and may enter in the future, into interest rate swaps to manage interest rate risk on its outstanding term debt.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
790
Interest rate swaps allow the Company to effectively convert fixed-rate payments into floating-rate payments or floating-rate payments into fixed-rate payments.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
791
Gains and losses on these instruments are generally offset by the corresponding losses and gains on the related hedging instrument.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
792
A 100 basis point increase in market interest rates would cause interest expense on the Company’s debt as of September 24, 2016 and September 26, 2015 to increase by $271 million and $200 million on an annualized basis, respectively.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
793
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.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
794
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.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
795
There is a risk that the Company will have to adjust local currency product pricing due to competitive pressures when there has been significant volatility in foreign currency exchange rates.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
796
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.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
797
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.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
798
The Company’s practice is to hedge a portion of its material foreign exchange exposures, typically for up to 12 months.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
799
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.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
800
Apple Inc. | 2016 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...
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
801
The VAR model consisted of using a Monte Carlo simulation to generate thousands of random market price paths assuming normal market conditions.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
802
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.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
803
The VAR model is not intended to represent actual losses but is used as a risk estimation and management tool.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
804
The model assumes normal market conditions.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
805
Forecasted transactions, firm commitments and assets and liabilities denominated in foreign currencies were excluded from the model.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
806
Based on the results of the model, the Company estimates with 95% confidence, a maximum one-day loss in fair value of $434 million as of September 24, 2016 compared to a maximum one-day loss in fair value of $342 million as of September 26, 2015.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
807
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.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
808
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 24, 2016 due to the inherent limitations associated with predicting the timing and amount of changes in interest rates, foreign currenc...
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
809
Apple Inc. | 2016 Form 10-K | 37 Item 8.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
810
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...
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
811
Apple Inc. | 2016 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.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
812
Apple Inc. | 2016 Form 10-K | 39 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In millions) See accompanying Notes to Consolidated Financial Statements.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
813
Apple Inc. | 2016 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.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
814
Apple Inc. | 2016 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.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
815
Apple Inc. | 2016 Form 10-K | 42 CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions) See accompanying Notes to Consolidated Financial Statements.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
816
Apple Inc. | 2016 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...
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
817
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.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
818
In addition, the Company sells a variety of third-party Apple-compatible products, including application software and various accessories through its retail and online stores.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
819
The Company sells to consumers, small and mid-sized businesses and education, enterprise and government customers.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
820
Basis of Presentation and Preparation The accompanying consolidated financial statements include the accounts of the Company.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
821
Intercompany accounts and transactions have been eliminated.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
822
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.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
823
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.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
824
Actual results could differ materially from those estimates.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
825
Certain prior period amounts in the consolidated financial statements have been reclassified to conform to the current period’s presentation.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
826
The Company’s fiscal year is the 52 or 53-week period that ends on the last Saturday of September.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
827
The Company’s fiscal years 2016, 2015 and 2014 ended on September 24, 2016, September 26, 2015 and September 27, 2014, respectively, and each spanned 52 weeks.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
828
An additional week is included in the first fiscal quarter approximately every five or six years to realign fiscal quarters with calendar quarters, which will next occur in the first quarter of the Company's fiscal year ending September 30, 2017.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
829
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.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
830
During 2016, the Company adopted an accounting standard that simplified the presentation of deferred income taxes by requiring deferred tax assets and liabilities be classified as noncurrent in a classified statement of financial position.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
831
The Company has adopted this accounting standard prospectively; accordingly, the prior period amounts in the Company’s Consolidated Balance Sheets within this Annual Report on Form 10-K were not adjusted to conform to the new accounting standard.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
832
The adoption of this accounting standard was not material to the Company’s consolidated financial statements.
0001628280-16-020309/full-submission.txt
0000320193
20161026
10-K
833
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
834
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
835
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
836
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
837
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