Apple 1998 Annual Report Download - page 43

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) WARRANTY EXPENSE
The Company provides currently for the estimated cost that may be incurred under product warranties when products are shipped.
ADVERTISING COSTS
Advertising costs are charged to expense the first time the advertising takes place. Advertising expense was $152 million, $143 million, and
$183 million for 1998, 1997, and 1996, respectively.
EARNINGS (LOSS) PER SHARE
The Company has adopted Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings Per Share." In accordance with SFAS No.
128, primary earnings per share has been replaced with basic earnings per share, and fully diluted earnings per share has been replaced with
diluted earnings per share which includes potentially dilutive securities such as outstanding options and convertible securities. Prior periods
presented have been presented to conform to SFAS No. 128; however, as the Company had a net loss in those periods, basic and diluted loss
per share are the same as the primary loss per share previously reported.
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. 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 dilutive potential shares of common stock had been
issued. The dilutive effect of outstanding options is reflected in diluted earnings per share by application of the treasury stock method. The
dilutive effect of convertible securities is reflected using the if-converted method.
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