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0000320193
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10-K
588
We believe that our audits provide a reasonable basis for our opinion.
0000912057-00-053623/full-submission.txt
0000320193
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589
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Apple Computer, Inc. and subsidiaries as of September 30, 2000 and September 25, 1999, and the results of their operations and their cash flows for each of the years in the three-y...
0000912057-00-053623/full-submission.txt
0000320193
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Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
0000912057-00-053623/full-submission.txt
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KPMG LLP Mountain View, California October 17, 2000 CONSOLIDATED BALANCE SHEETS (IN MILLIONS, EXCEPT SHARE AMOUNTS) SEPTEMBER 30, 2000 SEPTEMBER 25, 1999 ------------------ ------------------ ASSETS: Current assets: Cash and cash equivalents................................. $1,191 $1,326 Short-term investments............
0000912057-00-053623/full-submission.txt
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CONSOLIDATED STATEMENTS OF OPERATIONS (IN MILLIONS, EXCEPT SHARE AND PER SHARE AMOUNTS) THREE FISCAL YEARS ENDED SEPTEMBER 30, 2000 2000 1999 1998 - ------------------------------------------- -------- -------- --------- Net sales................................................... $ 7,983 $ 6,134 $ 5,941 Cost of sales....
0000912057-00-053623/full-submission.txt
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CONSOLIDATED STATEMENTS OF CASH FLOWS (IN MILLIONS) THREE FISCAL YEARS ENDED SEPTEMBER 30, 2000 2000 1999 1998 - ------------------------------------------- -------- -------- -------- Cash and cash equivalents, beginning of the year............ $1,326 $1,481 $1,230 ------ ------ ------ Operating: Net income...............
0000912057-00-053623/full-submission.txt
0000320193
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Apple Computer, Inc. and its subsidiaries (the Company) designs, manufactures, and markets personal computers and related software and peripherals for sale primarily to education, creative, consumer, and business customers.
0000912057-00-053623/full-submission.txt
0000320193
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BASIS OF PRESENTATION AND PREPARATION The accompanying consolidated financial statements include the accounts of the Company.
0000912057-00-053623/full-submission.txt
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Intercompany accounts and transactions have been eliminated.
0000912057-00-053623/full-submission.txt
0000320193
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597
The preparation of these consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in these consolidated financial statements and accompanying notes.
0000912057-00-053623/full-submission.txt
0000320193
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598
Actual results could differ materially from those estimates.
0000912057-00-053623/full-submission.txt
0000320193
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10-K
599
During the first quarter of 1999, the Company amended its by-laws to provide that beginning in 1999 its fiscal year would end on the last Saturday in September rather than the last Friday.
0000912057-00-053623/full-submission.txt
0000320193
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Likewise, beginning with the first fiscal quarter of 1999 each of the Company's fiscal quarters now also end on Saturday rather than Friday.
0000912057-00-053623/full-submission.txt
0000320193
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Accordingly, one day was added to the first quarter of 1999 so that the quarter ended on Saturday, December 26, 1998.
0000912057-00-053623/full-submission.txt
0000320193
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602
These changes did not have a material effect on the Company's revenue or results of operations for any quarter during fiscal 1999.
0000912057-00-053623/full-submission.txt
0000320193
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603
Fiscal years 1999 and 1998, each 52-week years, both ended on September 25th.
0000912057-00-053623/full-submission.txt
0000320193
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604
Approximately every six years, the Company reports a 53-week fiscal year to align its fiscal quarters with calendar quarters by adding a week to its first fiscal quarter.
0000912057-00-053623/full-submission.txt
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605
Consequently, an additional week was added to the first quarter of fiscal 2000.
0000912057-00-053623/full-submission.txt
0000320193
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All information presented herein is based on the Company's fiscal calendar.
0000912057-00-053623/full-submission.txt
0000320193
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FINANCIAL INSTRUMENTS The carrying amounts of cash and cash equivalents, short-term investments, accounts receivable, accounts payable, and accrued liabilities approximate their fair value due to the short maturities of those instruments.
0000912057-00-053623/full-submission.txt
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608
INVESTMENTS All highly liquid investments with a maturity of three months or less at the date of purchase are considered to be cash equivalents.
0000912057-00-053623/full-submission.txt
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609
Investments with maturities between three and twelve months are considered to be short-term investments.
0000912057-00-053623/full-submission.txt
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610
Investments with maturities greater than twelve months are classified as long-term assets.
0000912057-00-053623/full-submission.txt
0000320193
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611
Management determines the appropriate classification of its investments in debt and marketable equity securities at the time of purchase and reevaluates such designation as of each balance sheet date.
0000912057-00-053623/full-submission.txt
0000320193
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612
The Company's debt and marketable equity securities have been classified and accounted for as available-for-sale.
0000912057-00-053623/full-submission.txt
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613
These securities are carried at fair value, with the unrealized gains and losses, net of taxes, reported as a component of shareholders' equity.
0000912057-00-053623/full-submission.txt
0000320193
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These unrealized gains or losses include any unrealized losses and gains on interest rate contracts accounted for as hedges against the available-for-sale securities.
0000912057-00-053623/full-submission.txt
0000320193
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615
The cost of securities sold is based upon the specific identification method.
0000912057-00-053623/full-submission.txt
0000320193
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616
FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK In the ordinary course of business and as part of the Company's asset and liability management, the Company enters into various types of transactions that involve contracts and financial instruments with off-balance-sheet risk.
0000912057-00-053623/full-submission.txt
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617
These instruments are entered into in order to manage financial market risk, primarily interest rate and foreign exchange risk.
0000912057-00-053623/full-submission.txt
0000320193
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618
The Company enters into these financial instruments with major international financial institutions utilizing over-the-counter as opposed to exchange traded instruments.
0000912057-00-053623/full-submission.txt
0000320193
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619
The Company does not hold or transact in financial instruments for purposes other than risk management.
0000912057-00-053623/full-submission.txt
0000320193
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) The Company enters into interest rate derivative transactions, including interest rate swaps, collars, and floors, with financial institutions in order to better match the Company's floating-rate intere...
0000912057-00-053623/full-submission.txt
0000320193
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The Company may also enter into interest rate contracts that are intended to reduce the cost of the interest rate risk management program.
0000912057-00-053623/full-submission.txt
0000320193
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The Company enters into foreign exchange forward and option contracts with financial institutions primarily to protect against currency exchange risks associated with existing assets and liabilities, certain firmly committed transactions, and probable but not firmly committed transactions.
0000912057-00-053623/full-submission.txt
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Generally, the Company's practice is to hedge a majority of its existing material foreign exchange transaction exposures.
0000912057-00-053623/full-submission.txt
0000320193
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However, the Company may not hedge certain foreign exchange transaction exposures due to immateriality, prohibitive economic cost of hedging particular exposures, and availability of appropriate hedging instruments.
0000912057-00-053623/full-submission.txt
0000320193
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Foreign exchange forward contracts are carried at fair value in other current assets and liabilities.
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0000320193
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The premium costs of purchased foreign exchange option contracts are recorded in other current assets and amortized over the life of the option.
0000912057-00-053623/full-submission.txt
0000320193
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627
Probable but not firmly committed transactions comprise sales of the Company's products and purchases of raw material, subassemblies, and assembled finished goods in currencies other than the functional currency.
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0000320193
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A majority of these transactions are made through the Company's subsidiaries in Europe, Asia (particularly Japan), Canada, and Australia.
0000912057-00-053623/full-submission.txt
0000320193
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The Company purchases foreign exchange option contracts to hedge the currency exchange risks associated with these probable but not firmly committed transactions.
0000912057-00-053623/full-submission.txt
0000320193
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630
The Company also sells foreign exchange option contracts, in order to partially finance the purchase of these foreign exchange option contracts.
0000912057-00-053623/full-submission.txt
0000320193
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631
The term of the Company's foreign exchange hedging instruments, whether for firmly committed transactions, probable but not firmly committed transactions, or to partially finance the foreign exchange risk management program currently does not extend beyond six months.
0000912057-00-053623/full-submission.txt
0000320193
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In addition, the Company has entered into foreign exchange forward contracts to hedge certain intercompany loan transactions.
0000912057-00-053623/full-submission.txt
0000320193
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These forward contracts effectively change certain foreign currency denominated debt into U.S. dollar denominated debt, which better matches against the Company's U.S. dollar denominated cash equivalents and short-term investments.
0000912057-00-053623/full-submission.txt
0000320193
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Interest rate and foreign exchange instruments generally qualify as accounting hedges if their maturity dates are the same as the hedged transactions and if the hedged transactions meet certain requirements.
0000912057-00-053623/full-submission.txt
0000320193
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635
The Company monitors its interest rate and foreign exchange positions on a regular basis based on applicable and commonly used pricing models.
0000912057-00-053623/full-submission.txt
0000320193
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636
The correlation between the changes in the fair value of hedging instruments and the changes in the underlying hedged items is assessed periodically over the life of the hedged instrument.
0000912057-00-053623/full-submission.txt
0000320193
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In the event it is determined a hedge is ineffective, including if and when the hedged transactions no longer exist, the Company recognizes in income the change in market value of the instrument beginning on the date it was no longer an effective hedge.
0000912057-00-053623/full-submission.txt
0000320193
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Gains and losses on accounting hedges of existing assets or liabilities are generally recorded in income or shareholders' equity against the losses and gains on the hedged transactions.
0000912057-00-053623/full-submission.txt
0000320193
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Gains and losses related to qualifying accounting hedges of firmly committed or probable but not firmly committed transactions are deferred and recognized in income in the same period as the hedged transactions.
0000912057-00-053623/full-submission.txt
0000320193
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640
Gains and losses on accounting hedges realized before the settlement date of the related hedged transaction are also generally deferred and recognized in income in the same period as the hedged transactions.
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0000320193
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Gains and losses on interest rate and foreign exchange instruments not accounted for as hedges are recorded in income as a component of interest and other income (expense), net.
0000912057-00-053623/full-submission.txt
0000320193
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642
Sold interest rate and foreign exchange instruments do not qualify as accounting hedges.
0000912057-00-053623/full-submission.txt
0000320193
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643
Premiums associated with sold foreign exchange option contracts are recorded in other current assets and marked to market through earnings.
0000912057-00-053623/full-submission.txt
0000320193
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644
In June 1998, Statement of Financial Accounting Standards (SFAS) No.
0000912057-00-053623/full-submission.txt
0000320193
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645
133, "Accounting for Derivative Instruments and Hedging Activities" was issued.
0000912057-00-053623/full-submission.txt
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646
SFAS No.
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133 establishes accounting and reporting standards for derivative instruments, hedging activities, and exposure definition.
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648
SFAS No.
0000912057-00-053623/full-submission.txt
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133 requires an entity to recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value.
0000912057-00-053623/full-submission.txt
0000320193
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650
Derivatives that are not hedges must be adjusted to fair value through income.
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If the derivative is a hedge, depending on the nature of the hedge, changes in fair value will either be offset against the change in fair value of the hedged assets, liabilities, or firm commitments through earnings, or recognized in other comprehensive income until the hedged item is recognized in earnings.
0000912057-00-053623/full-submission.txt
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652
In June 1999, SFAS No.
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137, "Accounting for Derivative Instruments and Hedging Activities--Deferral of the Effective Date of FASB Statement No.
0000912057-00-053623/full-submission.txt
0000320193
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133," was issued.
0000912057-00-053623/full-submission.txt
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655
The statement deferred the effective date of SFAS No.
0000912057-00-053623/full-submission.txt
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133 until the first quarter of 2001.
0000912057-00-053623/full-submission.txt
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The Company will adopt SFAS No.
0000912057-00-053623/full-submission.txt
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133, "Accounting for Derivative Instruments and Hedging Activities," as of October 1, 2000.
0000912057-00-053623/full-submission.txt
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659
Net of the related income tax effect, the adoption of SFAS No.
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660
133 is expected to have a favorable cumulative-effect-type adjustment to net income of approximately $12 million and a favorable cumulative-effect-type adjustment to other comprehensive income of $15 million.
0000912057-00-053623/full-submission.txt
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Management does not believe that adoption of SFAS No.
0000912057-00-053623/full-submission.txt
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133 will significantly alter the Company's hedging strategies.
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However, its application may increase the volatility of other income and expense and other comprehensive income.
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INVENTORIES Inventories are stated at the lower of cost (first-in, first-out) or market.
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If the cost of the inventories exceeds their market value, provisions are made currently for the difference between the cost and the market value.
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PROPERTY, PLANT, AND EQUIPMENT Property, plant, and equipment are stated at cost.
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667
Depreciation is computed by use of the declining balance and straight-line methods over the estimated useful lives of the assets, which are 30 years for buildings, from 2 to 5 years for equipment, and the shorter of lease terms or estimated useful lives for leasehold improvements.
0000912057-00-053623/full-submission.txt
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668
INTERNAL-USE SOFTWARE Software acquired or developed for internal use is stated at cost and classified on the balance sheet in other assets.
0000912057-00-053623/full-submission.txt
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Depreciation is computed on a straight-line basis using an estimated useful life of no more than 5 years.
0000912057-00-053623/full-submission.txt
0000320193
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670
During fiscal year 2000, the Company adopted the American Institute of Certified Public Accountants (AICPA) Statement of Position (SOP) 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use."
0000912057-00-053623/full-submission.txt
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671
SOP 98-1 requires the capitalization of certain internal costs incurred in the acquisition or development of internal-use software.
0000912057-00-053623/full-submission.txt
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672
The adoption of SOP 98-1 did not have a material impact on the Company's consolidated results of operations or financial position during 2000.
0000912057-00-053623/full-submission.txt
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673
As of September 30, 2000 and September 25, 1999, the net carrying amount of software was $106 million and $44 million, respectively.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) LONG-LIVED ASSETS The Company reviews property, plant, and equipment and certain identifiable intangibles for impairment whenever events or changes in circumstances indicate the carrying amount of an as...
0000912057-00-053623/full-submission.txt
0000320193
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Recoverability of these assets is measured by comparison of its carrying amount, including the unamortized portion of any allocated goodwill, to future undiscounted cash flows the assets are expected to generate.
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If property, plant, and equipment 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, including any allocated goodwill, exceeds its fair market value.
0000912057-00-053623/full-submission.txt
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The recoverability of enterprise level goodwill is assessed whenever the facts and circumstances suggest the asset may be impaired.
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678
The Company assesses the recoverability of enterprise level goodwill by determining whether the unamortized goodwill balance can be recovered through undiscounted future cash flows.
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For the three years ended September 30, 2000, the Company has made no material adjustments to its long-lived assets except those made in connection with the restructuring actions described in Note 4.
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FOREIGN CURRENCY TRANSLATION The Company translates the assets and liabilities of its foreign sales subsidiaries at year-end exchange rates.
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Gains and losses from these translations are credited or charged to "accumulated translation adjustment" included in "accumulated other comprehensive income (loss)" in shareholders' equity.
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The Company's foreign manufacturing subsidiaries and certain other entities use the U.S. dollar as their functional currency and remeasure monetary assets and liabilities at year-end exchange rates, and inventories, property, and nonmonetary assets and liabilities at historical rates.
0000912057-00-053623/full-submission.txt
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Gains and losses from these translations are included in the Company's results of operations and were not significant in 2000, 1999 or 1998.
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REVENUE RECOGNITION The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed or determinable, and collectibility is probable.
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Generally, these criteria are met at the time product is shipped.
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686
Provisions are made currently for estimated product returns, price protection, rebates, and other sales programs.
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687
In December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin (SAB) No.
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