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0000320193
20101027
10-K
974
Beginning in the third quarter of 2010 in conjunction with the announcement of iOS 4, the Company’s ESPs for the embedded software upgrade rights included with iPhone, iPad and iPod touch reflect the positive financial impact expected by the Company as a result of its introduction of a mobile advertising platform for t...
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
975
iOS 4 supports iAd, the Company’s new mobile advertising platform, which enables applications on iPhone, iPad and iPod touch to embed media-rich advertisements.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
976
For all periods presented, the Company’s ESP for the embedded software upgrade right included with each Apple TV sold is $10.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
977
The Company’s ESP for the software upgrade right included with each iPhone sold through the Company’s second quarter of 2010 was $25.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
978
Beginning in April 2010 in conjunction with the Company’s announcement of iOS 4 for iPhone, the Company lowered its ESP for the software upgrade right included with each iPhone to $10.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
979
Beginning with initial sales of iPad in April 2010, the Company has also indicated it may from time-to-time provide future unspecified software upgrades and features free of charge to iPad customers.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
980
The Company’s ESP for the embedded software upgrade right included with the sale of each iPad is $10.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
981
In June 2010, the Company announced that certain previously sold iPod touch models would receive an upgrade to iOS 4 free of charge and indicated iPod touch devices running on iOS 4 may from time-to-time receive future unspecified software upgrades and features free of charge.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
982
The Company’s ESP for the embedded software upgrade right included with each iPod touch sold beginning in June 2010 is $5.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
983
The Company accounts for multiple element arrangements that consist only of software or software-related products, including the sale of upgrades to previously sold software, in accordance with industry specific accounting guidance for software and software-related transactions.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
984
For such transactions, revenue on arrangements that include multiple elements is allocated to each element based on the relative fair value of each element, and fair value is determined by VSOE.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
985
If the Company cannot objectively determine the fair value of any undelivered element included in such multiple-element arrangements, the Company defers revenue until all elements are delivered and services have been performed, or until fair value can objectively be determined for any remaining undelivered elements.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
986
When the fair value of a delivered element has not been established, but fair value exists for the undelivered elements, the Company uses the residual method to recognize revenue.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
987
Under the residual method, the fair value of the undelivered elements is deferred and the remaining portion of the arrangement fee is allocated to the delivered elements and is recognized as revenue.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
988
Except as described for iPhone, iPad, iPod touch and Apple TV, the Company generally does not offer unspecified upgrade rights to its customers in connection with software sales or the sale of AppleCare extended warranty and support contracts.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
989
A limited number of the Company’s software products are available with maintenance agreements that grant customers rights to unspecified future upgrades over the maintenance term on a when and if available basis.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
990
Revenue associated with such maintenance is recognized ratably over the maintenance term.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
991
Shipping Costs For all periods presented, amounts billed to customers related to shipping and handling are classified as revenue, and the Company’s shipping and handling costs are included in cost of sales.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
992
Warranty Expense The Company generally provides for the estimated cost of hardware and software warranties at the time the related revenue is recognized.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
993
The Company assesses the adequacy of its pre-existing warranty liabilities and adjusts the amounts as necessary based on actual experience and changes in future estimates.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
994
Software Development Costs Research and development costs are expensed as incurred.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
995
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.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
996
In most instances, the Company’s products are released soon after technological feasibility has been established.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
997
Therefore, costs incurred subsequent to achievement of technological feasibility are usually not significant, and generally most software development costs have been expensed as incurred.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
998
The Company did not capitalize any software development costs during 2010.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
999
In 2009 and 2008, the Company capitalized $71 million and $11 million, respectively, of costs associated with the development of Mac OS X Version 10.6 Snow Leopard (“Mac OS X Snow Leopard”), which was released during the fourth quarter of 2009.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,000
The capitalized costs are being amortized to cost of sales on a straight-line basis over a three year estimated useful life of the underlying technology.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,001
Total amortization related to capitalized software development costs was $48 million, $25 million and $27 million in 2010, 2009 and 2008, respectively.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,002
Advertising Costs Advertising costs are expensed as incurred.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,003
Advertising expense was $691 million, $501 million and $486 million for 2010, 2009 and 2008, respectively.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,004
Stock-Based Compensation The Company accounts for stock-based payment transactions in which the Company receives employee services in exchange for (a) equity instruments of the enterprise or (b) liabilities that are based on the fair value of the enterprise’s equity instruments or that may be settled by the issuance of...
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,005
Stock-based compensation cost for restricted stock units (“RSUs”) is measured based on the closing fair market value of the Company’s common stock on the date of grant.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,006
Stock-based compensation cost for stock options is estimated at the grant date based on each option’s fair-value as calculated by the Black-Scholes-Merton (“BSM”) option-pricing model.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,007
The Company recognizes stock-based compensation cost as expense ratably on a straight-line basis over the requisite service period.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,008
The Company will recognize a benefit from stock-based compensation in equity if an incremental tax benefit is realized by following the ordering provisions of the tax law.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,009
In addition, the Company accounts for the indirect effects of stock-based compensation on the research tax credit, the foreign tax credit and the domestic manufacturing deduction through the income statement.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,010
Further information regarding stock-based compensation can be found in Note 7, “Shareholders’ Equity and Stock-Based Compensation” of this Form 10-K. 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 expec...
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,011
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 are expected to be realized or settled.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,012
The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,013
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.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,014
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.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,015
See Note 6, “Income Taxes” of this Form 10-K for additional information.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,016
Earnings Per Common Share Basic earnings per common share is computed by dividing income available to common shareholders by the weighted-average number of shares of common stock outstanding during the period.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,017
Diluted earnings per common 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 secur...
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,018
Potentially dilutive securities include outstanding stock options, shares to be purchased under the employee stock purchase plan and unvested RSUs.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,019
The dilutive effect of potentially dilutive securities is reflected in diluted earnings per common share by application of the treasury stock method.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,020
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.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,021
The following table sets forth the computation of basic and diluted earnings per common share for the three years ended September 25, 2010 (in thousands, except net income in millions and per share amounts): Potentially dilutive securities representing 1.6 million, 12.6 million and 10.3 million shares of common stock f...
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,022
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.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,023
The Company’s debt and marketable equity securities have been classified and accounted for as available-for-sale.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,024
Management determines the appropriate classification of its investments in debt securities at the time of purchase and reevaluates the available-for-sale designations as of each balance sheet date.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,025
The Company classifies its marketable debt securities as either short-term or long-term based on each instrument’s underlying contractual maturity date.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,026
Marketable securities with maturities of less than 12 months are classified as short-term and marketable securities with maturities greater than 12 months are classified as long-term.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,027
These securities are carried at fair value, with the unrealized gains and losses, net of taxes, reported as a component of shareholders’ equity.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,028
The cost of securities sold is based upon the specific identification method.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,029
Derivative Financial Instruments The Company accounts for its derivative instruments as either assets or liabilities and carries them at fair value.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,030
Derivatives that are not defined as hedges must be adjusted to fair value through earnings.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,031
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 accumulated other comprehensive income in shareholders’ equity and reclassified in...
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,032
The ineffective portion of the gain or loss on the derivative instrument is recognized in current earnings.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,033
To receive hedge accounting treatment, cash flow hedges must be highly effective in offsetting changes to expected future cash flows on hedged transactions.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,034
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.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,035
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, the net gain or loss on the derivative instrument as well as the offsetting gain or loss on the hedged item attributable to the hedged risk are recognized in earnings ...
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,036
The Company did not have a net gain or loss on these derivative instruments during 2010, 2009 and 2008.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,037
The net gain or loss on the effective portion of a derivative instrument that is designated as an economic hedge of the foreign currency translation exposure of the net investment in a foreign operation is reported in the same manner as a foreign currency translation adjustment.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,038
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.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,039
Accordingly, any gains or losses related to this component are recognized in current earnings.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,040
Allowance for Doubtful Accounts The Company records its allowance for doubtful accounts based upon its assessment of various factors.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,041
The Company considers historical experience, the age of the accounts receivable balances, credit quality of the Company’s customers, current economic conditions, and other factors that may affect customers’ ability to pay.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,042
Inventories Inventories are stated at the lower of cost, computed using the first-in, first-out method, or market.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,043
If the cost of the inventories exceeds their market value, provisions are made currently for the difference between the cost and the market value.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,044
The Company’s inventories consist primarily of components and finished goods for all periods presented.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,045
Property, Plant and Equipment Property, plant and equipment are stated at cost.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,046
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, up to five years for equipment, and the shorter of lease terms or ten years for leasehold improvements.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,047
The Company capitalizes eligible costs to acquire or develop internal-use software that are incurred subsequent to the preliminary project stage.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,048
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.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,049
Depreciation and amortization expense on property and equipment was $815 million, $606 million and $387 million during 2010, 2009 and 2008, respectively.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,050
Long-Lived Assets Including Goodwill and Other Acquired Intangible Assets The Company reviews property, plant and equipment and certain identifiable intangibles, excluding goodwill, for impairment.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,051
Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,052
Recoverability of these assets is measured by comparison of their carrying amounts to future undiscounted cash flows the assets are expected to generate.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,053
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 exceeds its fair market value.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,054
The Company did not record any significant impairments during 2010, 2009 and 2008.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,055
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.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,056
The Company performs its goodwill and intangible asset impairment tests on or about August 31 of each year.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,057
The Company did not recognize any goodwill or intangible asset impairment charges in 2010, 2009 and 2008.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,058
The Company established reporting units based on its current reporting structure.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,059
For purposes of testing goodwill for impairment, goodwill has been allocated to these reporting units to the extent it relates to each reporting unit.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,060
The Company amortizes its intangible assets with definite lives over their estimated useful lives and reviews these assets for impairment.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,061
The Company is currently amortizing its acquired intangible assets with definite lives over periods ranging from three to ten years.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,062
Fair Value Measurements During 2009, the Company adopted the FASB’s new accounting standard on fair value measurements and disclosures for all financial assets and liabilities.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,063
The new accounting principles define fair value, provide a framework for measuring fair value, and expand the disclosures required for fair value measurements.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,064
During the first quarter of 2010, the Company adopted the new fair value accounting principles for all non-financial assets and non-financial liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis, which did not have a material effect on the Company...
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,065
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.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,066
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.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,067
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...
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,068
In accordance with the fair value accounting requirements, companies may choose to measure eligible financial instruments and certain other items at fair value.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,069
The Company has not elected the fair value option for any eligible financial instruments.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,070
Foreign Currency Translation and Remeasurement The Company translates the assets and liabilities of its non-U.S. dollar functional currency subsidiaries into U.S. dollars using exchange rates in effect at the end of each period.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,071
Revenue and expenses for these subsidiaries are translated using rates that approximate those in effect during the period.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,072
Gains and losses from these translations are credited or charged to foreign currency translation included in accumulated other comprehensive income in shareholders’ equity.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,073
The Company’s subsidiaries that use the U.S. dollar as their functional currency remeasure monetary assets and liabilities at exchange rates in effect at the end of each period, and inventories, property, and nonmonetary assets and liabilities at historical rates.
0001193125-10-238044/full-submission.txt