Apple 2003 Annual Report Download - page 48

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See accompanying notes to consolidated financial statements.
59
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1—Summary of Significant Accounting Policies
Apple Computer, Inc. and its subsidiaries (the Company) designs, manufactures and markets personal computers and related software,
peripherals and personal computing and communicating solutions. The Company's products include the Macintosh line of desktop and
notebook computers, the Mac OS X operating system, the iPod digital music player, and a portfolio of software products and peripherals for
education, creative, consumer and business customers. The Company sells its products through its online stores, direct sales force, third-party
wholesalers and resellers, and its own retail stores.
Basis of Presentation and Preparation
The accompanying consolidated financial statements include the accounts of the Company. Intercompany accounts and transactions have been
eliminated. The preparation of these consolidated financial statements in conformity with U.S. generally accepted accounting principles
requires management to make estimates and assumptions that affect the amounts reported in these consolidated financial statements and
accompanying notes. Actual results could differ materially from those estimates. Certain prior year amounts in the consolidated financial
statements and notes thereto have been reclassified to conform to the current year presentation.
Typically, the Company's fiscal year ends on the last Saturday of September. Fiscal years 2003, 2002 and 2001 were each 52-week years.
However, approximately every six years, the Company reports a 53-
week fiscal year to align its fiscal quarters with calendar quarters by adding
a week to its first fiscal quarter. All information presented herein is based on the Company's fiscal calendar.
Financial Instruments
Cash Equivalents and Short-term Investments
The Company places its short-term investments in highly liquid securities issued by high credit quality issuers. All highly liquid investments
with maturities of three months or less at the date of purchase are classified as cash equivalents; highly liquid investments with maturities
greater than three months are classified as short-term investments. Management determines the appropriate classification of its investments in
debt and marketable equity securities at the time of purchase and reevaluates such designation as of each balance sheet date. The Company's
debt and marketable equity securities have been classified and accounted for as available-for-sale. These securities are carried at fair value,
with the unrealized gains and losses, net of taxes, reported as a component of shareholders' equity. The cost of securities sold is based upon the
specific identification method.
Non
-Current Debt and Equity Investments
The Company has made investments in non-current debt and equity investments of public and privately held companies that have been
reflected in the consolidated balance sheets as long-term assets within other assets. They are not categorized as current assets either because,
given their nature, they are not readily convertible into cash or because they represent potentially longer-term investments by the Company.
Further, the fair value of these investments has been subject to a high degree of volatility. The Company's non-current debt and equity
investments have been categorized as available-for-sale requiring that they be carried at fair value with unrealized gains and losses, net of
taxes, reported in equity as a component of accumulated other comprehensive income. However, the Company recognizes an impairment
Cash generated by financing activities
27
105
42
Increase (decrease) in cash and cash equivalents
1,144
(58
)
1,119
Cash and cash equivalents, end of the year
$
3,396
$
2,252
$
2,310
Supplemental cash flow disclosures:
Cash paid during the year for interest
$
20
$
20
$
20
Cash paid for income taxes, net
$
45
$
11
$
42
Noncash transactions:
Issuance of common stock for conversion of Series A preferred stock
$
—
$
—
$
76
Issuance of common stock in connection with acquisition
$
—
$
—
$
66