Apple 2004 Annual Report Download - page 30

Download and view the complete annual report

Please find page 30 of the 2004 Apple annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 132

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132

the assets exceeds their fair market value. Although the Company has recognized no material impairment adjustments related to its property,
plant, and equipment or identifiable intangibles during the past three fiscal years, except those made in conjunction with restructuring actions,
deterioration in the Company's business in a geographic region or business segment in the future, including deterioration in the performance of
individual retail stores, could lead to such impairment adjustments in future periods in which such business issues are identified.
In accordance with Statement of Financial Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible Assets , the Company
performs a review of goodwill for impairment annually, or earlier if indicators of potential impairment exist. The review of goodwill for
potential impairment is highly subjective and requires that: (1) goodwill be allocated to various reporting units of the Company's business to
which it relates; (2) the Company estimate the fair value of those reporting units to which the goodwill relates; and (3) the Company determine
the book value of those reporting units. If the estimated fair value of reporting units with allocated goodwill is determined to be less than their
book value, the Company is required to estimate the fair value of all identifiable assets and liabilities of those reporting units in a manner similar
to a purchase price allocation for an acquired business. This requires independent valuation of certain internally developed and unrecognized
assets including in-process research and development and developed technology. Once this process is complete, the amount of goodwill
impairment, if any, can be determined.
Based on the Company's estimates as of September 25, 2004 there was no impairment of goodwill. However, changes in various circumstances
including changes in the Company's market capitalization, changes in the Company's forecasts, and changes in the Company's internal business
structure could cause one or more of the Company's reporting units to be valued differently thereby causing an impairment of goodwill.
Additionally, in response to changes in the personal computer industry and changes in global or regional economic conditions, the Company
may strategically realign its resources and consider restructuring, disposing, or otherwise exiting businesses, which could result in an impairment
of property, plant, and equipment, identifiable intangibles, or goodwill.
Warranty Costs
The Company provides currently for the estimated cost for product warranties at the time the related revenue is recognized based on historical
and projected warranty claim rates, historical and projected cost-per-claim, and knowledge of specific product failures that are outside of the
Company's typical experience. Each quarter, the Company reevaluates its estimates to assess the adequacy of its recorded warranty liabilities
considering the size of the installed base of products subject to warranty protection, and adjusts the amounts as necessary. If actual product
failure rates or repair costs differ from estimates, revisions to the estimated warranty liability would be required and could negatively affect the
Company's results of operations.
Income Taxes
The Company records a tax provision for the anticipated tax consequences of the reported results of operations. In accordance with SFAS
No. 109,
Accounting for 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 temporary differences between the financial reporting and tax
bases of assets and liabilities, and for operating losses and tax credit carryforwards. 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. The
Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.
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 the tax effects of the deferred tax
27