Apple 1998 Annual Report Download - page 42

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out) or market. If the cost of the inventories exceeds their market value, provisions are
made currently for the difference between the cost and the market value.
PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment are stated at cost. Depreciation and amortization are 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 and from 2 to 5 years for equipment.
LONG-LIVED ASSETS
The Company reviews property, plant, and equipment and certain identifiable intangibles for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be recoverable. 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. If property, plant, and equipment and certain identifiable intangibles are considered to be impaired, the impairment to be
recognized is measured by the amount by which the carrying amount of the assets, including any allocated goodwill, exceeds its fair market
value. The recoverability of enterprise level goodwill is assessed whenever the facts and circumstances suggest that the asset may be impaired
and a write-down material. The Company assesses the recoverability of enterprise level goodwill by determining whether the unamortized
goodwill balance can be recovered through undiscounted future cash flows. For the three years ended September 25, 1998, the Company has
made no adjustments to its long-lived assets except those made in connection with its restructuring of operations.
STOCK-BASED COMPENSATION
The Company measures compensation expense for its stock-based compensation plans using the intrinsic value method and has provided in
Note 6 pro forma disclosures of the effect on net income and earnings per share as if the fair value
-based method had been applied in
measuring compensation expense.
FOREIGN CURRENCY TRANSLATION
The Company translates the assets and liabilities of its foreign sales subsidiaries at year-end exchange rates. Gains and losses from these
translations are credited or charged to "accumulated translation adjustment" included in "other" in shareholders' equity. The Company's foreign
manufacturing subsidiaries and certain other entities use the U.S. dollar as the functional currency and translate monetary assets and liabilities
at year-end exchange rates, and inventories, property, and non-monetary assets and liabilities at historical rates. Gains and losses from these
translations are included in the consolidated results of operations and are immaterial.
REVENUE RECOGNITION
The Company recognizes revenue at the time products are shipped. Provisions are made currently for estimated product returns, price
protection, rebates, and other sales programs that may occur. Historically, actual amounts recorded for product returns and price protection
have not varied significantly from estimated amounts.
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