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0000320193 | 20141027 | 10-K | 826 | 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. | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 827 | 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 make an adjustment to the valuation allowance that would be charged to earnings in the period such determination is made. | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 828 | 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. | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 829 | 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. | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 830 | Apple Inc. | 2014 Form 10-K | 41
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 ... | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 831 | The Company records a liability when it is probable that a loss has been incurred and the amount is reasonably estimable. | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 832 | There is significant judgment required in both the probability determination and as to whether an exposure can be reasonably estimated. | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 833 | 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 legal and other contingencies. | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 834 | However, the outcome of legal proceedings and claims brought against the Company is subject to significant uncertainty. | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 835 | 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... | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 836 | Item 7A. | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 837 | 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... | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 838 | 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. | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 839 | 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. | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 840 | Interest Rate Risk
While the Company is exposed to interest rate fluctuations in many of the world’s leading industrialized countries, the Company’s interest income and expense are most sensitive to fluctuations in U.S. interest rates. | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 841 | 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. | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 842 | Investments
The Company’s investment policy and strategy are focused on preservation of capital and supporting the Company’s liquidity requirements. | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 843 | The Company uses a combination of internal and external management to execute its investment strategy and achieve its investment objectives. | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 844 | The Company’s exposure to changes in interest rates relates primarily to the Company’s investment portfolio. | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 845 | The Company typically invests in highly-rated securities, and its investment policy generally limits the amount of credit exposure to any one issuer. | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 846 | The policy requires investments generally to be investment grade, with the primary objective of minimizing the potential risk of principal loss. | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 847 | 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... | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 848 | Based on investment positions as of September 27, 2014, a hypothetical 100 basis point increase in interest rates across all maturities would result in a $3.4 billion incremental decline in the fair market value of the portfolio. | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 849 | As of September 28, 2013, a similar 100 basis point increase in the yield curve would have resulted in a $2.7 billion incremental decline in the fair market value of the portfolio. | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 850 | Such losses would only be realized if the Company sold the investments prior to maturity. | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 851 | Apple Inc. | 2014 Form 10-K | 42
Debt
In April 2014, the Board of Directors authorized the Company to issue Commercial Paper pursuant to a commercial paper program. | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 852 | As of September 27, 2014, the Company had $6.3 billion of Commercial Paper outstanding, with maturities generally less than nine months. | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 853 | In the third quarters of 2014 and 2013, the Company issued $12.0 billion and $17.0 billion of long-term debt, respectively. | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 854 | The debt issuances included floating- and fixed-rate notes with varying maturities for an aggregate principal amount of $29.0 billion (collectively the “Notes”). | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 855 | The Company has entered, and may enter in the future, into interest rate swaps to manage interest rate risk on the Notes. | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 856 | Interest rate swaps allow the Company to effectively convert fixed-rate payments into floating-rate payments or floating-rate payments into fixed-rate payments. | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 857 | In the third quarter of 2014, the Company entered into interest rate swaps with an aggregate notional amount of $9.0 billion, which effectively converted most of the fixed-rate notes into floating-rate notes, and in the third quarter of 2013, the Company entered into interest rate swaps with an aggregate notional amoun... | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 858 | As of September 27, 2014, a 100 basis point increase in market interest rates would cause interest expense on the Company’s debt to increase by $110 million on an annualized basis. | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 859 | 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. | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 860 | 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. | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 861 | There is a risk that the Company will have to adjust local currency product pricing due to competitive pressures when there have been significant volatility in foreign currency exchange rates. | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 862 | 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. | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 863 | The Company’s practice is to hedge a portion of its material foreign exchange exposures, typically for up to 12 months. | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 864 | 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. | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 865 | 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 rates. | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 866 | The VAR model consisted of using a Monte Carlo simulation to generate thousands of random market price paths assuming normal market conditions. | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 867 | 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. | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 868 | The VAR model is not intended to represent actual losses but is used as a risk estimation and management tool. | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 869 | The model assumes normal market conditions. | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 870 | Forecasted transactions, firm commitments and assets and liabilities denominated in foreign currencies were excluded from the model. | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 871 | Based on the results of the model, the Company estimates with 95% confidence a maximum one-day loss in fair value of $240 million as of September 27, 2014 compared to a maximum one-day loss in fair value of $201 million as of September 28, 2013. | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 872 | 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. | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 873 | 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 27, 2014 due to the inherent limitations associated with predicting the timing and amount of changes in interest rates, foreign currenc... | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 874 | Apple Inc. | 2014 Form 10-K | 43
Item 8. | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 875 | 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... | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 876 | Apple Inc. | 2014 Form 10-K | 44
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. | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 877 | Apple Inc. | 2014 Form 10-K | 45
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In millions)
See accompanying Notes to Consolidated Financial Statements. | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 878 | Apple Inc. | 2014 Form 10-K | 46
CONSOLIDATED BALANCE SHEETS
(In millions, except number of shares which are reflected in thousands and par value)
See accompanying Notes to Consolidated Financial Statements. | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 879 | Apple Inc. | 2014 Form 10-K | 47
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(In millions, except number of shares which are reflected in thousands)
See accompanying Notes to Consolidated Financial Statements. | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 880 | Apple Inc. | 2014 Form 10-K | 48
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
See accompanying Notes to Consolidated Financial Statements. | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 881 | Apple Inc. | 2014 Form 10-K | 49
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... | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 882 | 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. | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 883 | In addition, the Company sells a variety of third-party iPhone, iPad, Mac and iPod compatible products, including application software, and various accessories through its online and retail stores. | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 884 | The Company sells to consumers, small and mid-sized businesses, and education, enterprise and government customers. | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 885 | Basis of Presentation and Preparation
The accompanying consolidated financial statements include the accounts of the Company. | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 886 | Intercompany accounts and transactions have been eliminated. | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 887 | 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. | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 888 | Actual results could differ materially from those estimates. | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 889 | The Company’s fiscal year is the 52 or 53-week period that ends on the last Saturday of September. | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 890 | The Company’s fiscal years 2014, 2013 and 2012 ended on September 27, 2014, September 28, 2013 and September 29, 2012, respectively. | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 891 | An additional week is included in the first fiscal quarter approximately every six years to realign fiscal quarters with calendar quarters. | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 892 | Fiscal years 2014 and 2013 spanned 52 weeks each. | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 893 | Fiscal year 2012 spanned 53 weeks, with a 14th week included in the first quarter of 2012. | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 894 | 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. | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 895 | During the first quarter of 2014, the Company adopted updated accounting standards that (i) required disclosure of additional information about the amounts reclassified out of accumulated other comprehensive income (“AOCI”) by component and (ii) required gross and net disclosures about offsetting assets and liabilities... | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 896 | The adoption of these updated standards only impacted the disclosures in the Notes to Consolidated Financial Statements; accordingly, the adoption had no impact on the Company’s financial position or results of operations. | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 897 | The Company has provided these additional disclosures in this Form 10-K in Note 8, “Comprehensive Income” and Note 2, “Financial Instruments,” respectively. | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 898 | Common Stock Split
On June 6, 2014, the Company effected a seven-for-one stock split to shareholders of record as of June 2, 2014. | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 899 | All share and per share information has been retroactively adjusted to reflect the stock split. | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 900 | Revenue Recognition
Net sales consist primarily of revenue from the sale of hardware, software, digital content and applications, accessories and service and support contracts. | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 901 | 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. | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 902 | Product is considered delivered to the customer once it has been shipped and title, risk of loss and rewards of ownership have been transferred. | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 903 | For most of the Company’s product sales, these criteria are met at the time the product is shipped. | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 904 | 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. | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 905 | 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. | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 906 | 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. | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 907 | Apple Inc. | 2014 Form 10-K | 50
For the sale of most third-party products, the Company recognizes revenue based on the gross amount billed to customers because the Company establishes its own pricing for such products, retains related inventory risk for physical products, is the primary obligor to the customer and ass... | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 908 | For third-party applications sold through the App Store and Mac App Store and certain digital content sold through the iTunes Store, the Company does not determine the selling price of the products and is not the primary obligor to the customer. | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 909 | Therefore, the Company accounts for such sales on a net basis by recognizing in net sales only the commission it retains from each sale. | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 910 | The portion of the gross amount billed to customers that is remitted by the Company to third-party app developers and certain digital content owners is not reflected in the Company’s Consolidated Statements of Operations. | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 911 | The Company records deferred revenue when it receives payments in advance of the delivery of products or the performance of services. | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 912 | This includes amounts that have been deferred for unspecified and specified software upgrade rights and non-software services that are attached to hardware and software products. | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 913 | The Company sells gift cards redeemable at its retail and online stores, and also sells gift cards redeemable on the iTunes Store for the purchase of digital content and software. | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 914 | The Company records deferred revenue upon the sale of the card, which is relieved upon redemption of the card by the customer. | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 915 | Revenue from AppleCare service and support contracts is deferred and recognized over the service coverage periods. | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 916 | AppleCare service and support contracts typically include extended phone support, repair services, web-based support resources and diagnostic tools offered under the Company’s standard limited warranty. | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 917 | The Company records reductions to revenue for estimated commitments related to price protection and other customer incentive programs. | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 918 | For transactions involving price protection, the Company recognizes revenue net of the estimated amount to be refunded. | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 919 | For the Company’s other customer incentive programs, the estimated cost of these programs is recognized at the later of the date at which the Company has sold the product or the date at which the program is offered. | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 920 | The Company also records reductions to revenue for expected future product returns based on the Company’s historical experience. | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 921 | Revenue is recorded net of taxes collected from customers that are remitted to governmental authorities, with the collected taxes recorded as current liabilities until remitted to the relevant government authority. | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 922 | Revenue Recognition for Arrangements with Multiple Deliverables
For multi-element arrangements that include hardware products containing software essential to the hardware product’s functionality, undelivered software elements that relate to the hardware product’s essential software, and undelivered non-software servic... | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 923 | In such circumstances, the Company uses a hierarchy to determine the selling price to be used for allocating revenue to deliverables: (i) vendor-specific objective evidence of fair value (“VSOE”), (ii) third-party evidence of selling price (“TPE”) and (iii) best estimate of selling price (“ESP”). | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 924 | VSOE generally exists only when the Company sells the deliverable separately and is the price actually charged by the Company for that deliverable. | 0001193125-14-383437/full-submission.txt |
0000320193 | 20141027 | 10-K | 925 | ESPs reflect the Company’s best estimates of what the selling prices of elements would be if they were sold regularly on a stand-alone basis. | 0001193125-14-383437/full-submission.txt |
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