Apple 2005 Annual Report Download - page 58

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Further information related to the Company’s global market risks may be found in Part II, Item 7A of this Form 10-K under the subheading
“Foreign Currency Risk” and may be found in Part II, Item 8 of this Form 10-K at Notes 1 and 2 of Notes to Consolidated Financial
Statements.
The Company is subject to risks associated with environmental regulations.
Production and marketing of products in certain states and countries may subject the Company to environmental and other regulations
including, in some instances, the requirement to provide customers the ability to return product at the end of its useful life, and place
responsibility for environmentally safe disposal or recycling with the Company. Such laws and regulations have recently been passed in several
jurisdictions in which the Company operates, including various European Union member countries, Japan, and certain states within the U.S. In
the future, these laws could have a material adverse effect on the Company’s results of operations.
Changes in accounting rules could affect the Company’s future operating results.
Financial statements are prepared in accordance with U.S. generally accepted accounting principles. These principles are subject to
interpretation by various governing bodies, including the FASB and the SEC, who create and interpret appropriate accounting standards. A
change from current accounting standards could have a significant effect on the Company’
s results of operations. In December 2004, the FASB
issued new guidance that addresses the accounting for share-based payments, SFAS No. 123R. In April 2005, the SEC deferred the effective
date of SFAS No. 123R to years beginning after June 15, 2005. Therefore, SFAS No. 123R will be effective for the Company beginning in its
first quarter of fiscal 2006. The Company expects the adoption of SFAS No. 123R will result in a reduction of diluted earnings per common
share of approximately $0.03 for the first quarter of fiscal 2006. Although the effect from the adoption of SFAS No. 123R is expected to have a
material impact on the Company’s results of operations, future changes to various assumptions used to determine the fair-value of awards
issued or the amount and type of equity awards granted create uncertainty as to the amount of future stock-based compensation expense.
Changes in the Company’s tax rates could affect its future results.
The Company’s future effective tax rates could be favorably or unfavorably affected by changes in the mix of earnings in countries with
differing statutory tax rates, changes in the valuation of the Company’s deferred tax assets and liabilities, or by changes in tax laws or their
interpretation. In addition, the Company is subject to the continuous examination of its income tax returns by the Internal Revenue Service and
other tax authorities. The Company regularly assesses the likelihood of adverse outcomes resulting from these examinations to determine the
adequacy of its provision for income taxes. There can be no assurance that the outcomes from these continuous examinations will not have an
adverse affect on the Company’s net income and financial condition.
The Company’s stock price may be volatile.
The Company’s stock has at times experienced substantial price volatility as a result of variations between its actual and anticipated financial
results and as a result of announcements by the Company and its competitors. The stock market has experienced extreme price and volume
fluctuations that have affected the market price of many technology companies in ways that may have been unrelated to the operating
performance of these companies. These factors, including lack of positive general economic and political conditions and investors’ concerns
regarding the credibility of corporate financial reporting and integrity of financial markets, may materially adversely affect the market price of
the Company’s stock in the future. In addition, increases in the Company’s stock price may result in greater dilution of earnings per share.
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