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0000320193
20141027
10-K
926
For multi-element arrangements accounted for in accordance with industry specific software accounting guidance, the Company allocates revenue to all deliverables based on the VSOE of each element, and if VSOE does not exist revenue is recognized when elements lacking VSOE are delivered.
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
927
For sales of qualifying versions of iPhone, iPad and iPod touch (“iOS devices”), Mac and Apple TV, the Company has indicated it may from time to time provide future unspecified software upgrades and features to the essential software bundled with each of these hardware products free of charge to customers.
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
928
Essential software for iOS devices includes iOS and related applications and for Mac includes OS X and related applications.
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
929
The Company also provides various non-software services to owners of qualifying versions of iOS devices and Mac.
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
930
The Company has identified up to three deliverables regularly included in arrangements involving the sale of these devices.
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
931
The first deliverable is the hardware and software essential to the functionality of the hardware device delivered at the time of sale.
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
932
The second deliverable is the embedded right included with the purchase of iOS devices, Mac and Apple TV to receive on a when-and-if-available basis, future unspecified software upgrades and features relating to the product’s essential software.
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
933
The third deliverable is the non-software services to be provided to qualifying versions of iOS devices and Mac.
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
934
The Company allocates revenue between these deliverables using the relative selling price method.
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
935
Because the Company has neither VSOE nor TPE for these deliverables, the allocation of revenue is based on the Company’s ESPs.
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
936
Revenue allocated to the delivered hardware and the related essential software is recognized at the time of sale provided the other conditions for revenue recognition have been met.
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
937
Revenue allocated to the embedded unspecified Apple Inc. | 2014 Form 10-K | 51 software upgrade rights and the non-software services is deferred and recognized on a straight-line basis over the estimated period the software upgrades and non-software services are expected to be provided for each of these devices, which ...
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
938
Cost of sales related to delivered hardware and related essential software, including estimated warranty costs, are recognized at the time of sale.
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
939
Costs incurred to provide non-software services are recognized as cost of sales as incurred, and engineering and sales and marketing costs are recognized as operating expenses as incurred.
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
940
The Company’s process for determining its ESP for deliverables without VSOE or TPE considers multiple factors that may vary depending upon the unique facts and circumstances related to each deliverable.
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
941
The Company believes its customers would be reluctant to buy unspecified software upgrade rights for the essential software included with its qualifying hardware products.
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
942
This view is primarily based on the fact that unspecified software upgrade rights do not obligate the Company to provide upgrades at a particular time or at all, and do not specify to customers which upgrades or features will be delivered.
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
943
The Company also believes its customers would be unwilling to pay a significant amount for access to the non-software services because other companies offer similar services at little or no cost to users.
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
944
Therefore, the Company has concluded that if it were to sell upgrade rights or access to the non-software services on a standalone basis, including those rights and services attached to iOS devices, Mac and Apple TV, the selling prices would be relatively low.
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
945
Key factors considered by the Company in developing the ESPs for software upgrade rights include prices charged by the Company for similar offerings, market trends in the pricing of Apple-branded and third-party Mac and iOS compatible software, the nature of the upgrade rights (e.g., unspecified versus specified) and t...
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
946
The Company may also consider additional factors as appropriate, including the impact of other products and services provided to customers, the pricing of competitive alternatives if they exist, product-specific business objectives and the length of time a particular version of a device has been available.
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
947
When relevant, the same factors are considered by the Company in developing ESPs for offerings such as the non-software services with additional consideration given to the estimated cost to provide such services.
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
948
In 2014, 2013 and 2012, the Company’s combined ESPs for the unspecified software upgrade rights and the rights to receive the non-software services included with its qualifying hardware devices have ranged from $5 to $40.
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
949
As of September 27, 2014, the combined ESPs for Mac was $40 and for iPhone and iPad ranged from $15 to $25.
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
950
Revenue allocated to such rights is deferred and recognized on a straight-line basis over the estimated period the rights are expected to be provided for each device, which ranges from two to four years.
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
951
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.
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
952
Warranty Costs The Company generally provides for the estimated cost of hardware and software warranties at the time the related revenue is recognized.
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
953
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.
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
954
Software Development Costs Research and development (“R&D”) costs are expensed as incurred.
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
955
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.
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
956
In most instances, the Company’s products are released soon after technological feasibility has been established.
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
957
Costs incurred subsequent to achievement of technological feasibility were not significant, and software development costs were expensed as incurred during 2014, 2013 and 2012.
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
958
Advertising Costs Advertising costs are expensed as incurred and included in selling, general and administrative expenses.
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
959
Advertising expense was $1.2 billion, $1.1 billion and $1.0 billion for 2014, 2013 and 2012, respectively.
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
960
Apple Inc. | 2014 Form 10-K | 52 Share-based Compensation The Company recognizes expense related to share-based payment transactions in which it receives employee services in exchange for (a) equity instruments of the Company or (b) liabilities that are based on the fair value of the enterprise’s equity instruments or ...
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
961
Share-based compensation cost for restricted stock and restricted stock units (“RSUs”) is measured based on the closing fair market value of the Company’s common stock on the date of grant.
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
962
The Company recognizes share-based compensation cost over the award’s requisite service period on a straight-line basis for time-based RSUs and on a graded basis for RSUs that are contingent on the achievement of performance metrics.
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
963
The Company recognizes a benefit from share-based compensation in the Consolidated Statements of Shareholders’ Equity if an incremental tax benefit is realized.
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
964
In addition, the Company recognizes the indirect effects of share-based compensation on R&D tax credits, foreign tax credits and domestic manufacturing deductions in the Consolidated Statements of Operations.
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
965
Further information regarding share-based compensation can be found in Note 9, “Benefit Plans” 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 expected future tax consequences of tempo...
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
966
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.
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
967
The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
968
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.
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
969
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.
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
970
See Note 5, “Income Taxes” of this Form 10-K for additional information.
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
971
Earnings Per Share Basic earnings per share is computed by dividing income available to common shareholders by the weighted-average number of shares of common stock outstanding during the period.
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
972
Diluted earnings per 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 securities h...
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
973
Potentially dilutive securities include outstanding stock options, shares to be purchased under the Company’s employee stock purchase plan, unvested restricted stock and unvested RSUs.
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
974
The dilutive effect of potentially dilutive securities is reflected in diluted earnings per share by application of the treasury stock method.
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
975
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.
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
976
The following table shows the computation of basic and diluted earnings per share for 2014, 2013 and 2012 (net income in millions and shares in thousands): Potentially dilutive securities, the effect of which would have been antidilutive, were not significant for 2014, 2013 and 2012.
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
977
The Company excluded these securities from the computation of diluted earnings per share.
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
978
Apple Inc. | 2014 Form 10-K | 53 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.
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
979
The Company’s marketable debt and equity securities have been classified and accounted for as available-for-sale.
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
980
Management determines the appropriate classification of its investments at the time of purchase and reevaluates the designations at each balance sheet date.
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
981
The Company classifies its marketable debt securities as either short-term or long-term based on each instrument’s underlying contractual maturity date.
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
982
Marketable debt securities with maturities of 12 months or less are classified as short-term and marketable debt securities with maturities greater than 12 months are classified as long-term.
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
983
The Company classifies its marketable equity securities, including mutual funds, as either short-term or long-term based on the nature of each security and its availability for use in current operations.
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
984
The Company’s marketable debt and equity securities are carried at fair value, with the unrealized gains and losses, net of taxes, reported as a component of shareholders’ equity.
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
985
The cost of securities sold is based upon the specific identification method.
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
986
Derivative Financial Instruments The Company accounts for its derivative instruments as either assets or liabilities and carries them at fair value.
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
987
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 AOCI in shareholders’ equity and reclassified into income in the same period or pe...
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
988
The ineffective portion of the gain or loss on the derivative instrument, if any, is recognized in current income.
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
989
To receive hedge accounting treatment, cash flow hedges must be highly effective in offsetting changes to expected future cash flows on hedged transactions.
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
990
For options designated as cash flow hedges, changes in the time value are excluded from the assessment of hedge effectiveness and are recognized in income.
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
991
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, both 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 earn...
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
992
For derivative instruments designated as a hedge of the foreign currency translation exposure of the net investment in a foreign operation, the net gain or loss on the effective portion of the derivative instrument is reported in the same manner as a foreign currency translation adjustment.
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
993
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.
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
994
Accordingly, any gains or losses related to this component are recognized in current income.
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
995
Derivatives that do not qualify as hedges are adjusted to fair value through current income.
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
996
Allowance for Doubtful Accounts The Company records its allowance for doubtful accounts based upon its assessment of various factors.
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
997
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.
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
998
Inventories Inventories are stated at the lower of cost, computed using the first-in, first-out method, or market.
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
999
If the cost of the inventories exceeds their market value, provisions are made currently for the difference between the cost and the market value.
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
1,000
Property, Plant and Equipment Property, plant and equipment are stated at cost.
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
1,001
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; between two to five years for machinery and equipment, including product tooling and manufacturing process equipment;...
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
1,002
The Company capitalizes eligible costs to acquire or develop internal-use software that are incurred subsequent to the preliminary project stage.
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
1,003
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.
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
1,004
Depreciation and amortization expense on property and equipment was $6.9 billion, $5.8 billion and $2.6 billion during 2014, 2013 and 2012, respectively.
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
1,005
Apple Inc. | 2014 Form 10-K | 54 Long-Lived Assets Including Goodwill and Other Acquired Intangible Assets The Company reviews property, plant and equipment, inventory component prepayments and certain identifiable intangibles, excluding goodwill, for impairment.
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
1,006
Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable.
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
1,007
Recoverability of these assets is measured by comparison of their carrying amounts to future undiscounted cash flows the assets are expected to generate.
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
1,008
If property, plant and equipment, inventory component prepayments 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 value.
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
1,009
The Company did not record any significant impairments during 2014, 2013 and 2012.
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
1,010
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.
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
1,011
The Company performs its goodwill and intangible asset impairment tests in the fourth quarter of each year.
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
1,012
The Company did not recognize any impairment charges related to goodwill or indefinite lived intangible assets during 2014, 2013 and 2012.
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
1,013
The Company established reporting units based on its current reporting structure.
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
1,014
For purposes of testing goodwill for impairment, goodwill has been allocated to these reporting units to the extent it relates to each reporting unit.
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
1,015
In 2014 and 2013, the Company’s goodwill was allocated to the Americas and Europe reportable operating segments.
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
1,016
The Company amortizes its intangible assets with definite useful lives over their estimated useful lives and reviews these assets for impairment.
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
1,017
The Company typically amortizes its acquired intangible assets with definite useful lives over periods from three to seven years.
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
1,018
Fair Value Measurements 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.
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
1,019
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.
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
1,020
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...
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
1,021
Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement: Level 1 - Quoted prices in active marke...
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
1,022
Level 2 - Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset...
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
1,023
Level 3 - Inputs that are generally unobservable and typically reflect management’s estimate of assumptions that market participants would use in pricing the asset or liability.
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
1,024
The Company’s valuation techniques used to measure the fair value of money market funds and certain marketable equity securities were derived from quoted prices in active markets for identical assets or liabilities.
0001193125-14-383437/full-submission.txt
0000320193
20141027
10-K
1,025
The valuation techniques used to measure the fair value of the Company’s debt instruments and all other financial instruments, all of which have counterparties with high credit ratings, were valued based on quoted market prices or model driven valuations using significant inputs derived from or corroborated by observab...
0001193125-14-383437/full-submission.txt