Apple 2005 Annual Report Download - page 68

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 1—Summary of Significant Accounting Policies (Continued)
Asset Retirement Obligations
The Company records obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs in
accordance with SFAS No. 143, Accounting for Asset Retirement Obligations . The Company reviews legal obligations associated with the
retirement of long-lived assets that result from the acquisition, construction, development and/or normal use of the assets. If it is determined
that a legal obligation exists, the fair value of the liability for an asset retirement obligation is recognized in the period in which it is incurred if
a reasonable estimate of fair value can be made. The fair value of the liability is added to the carrying amount of the associated asset and this
additional carrying amount is depreciated over the life of the asset. The difference between the gross expected future cash flow and its present
value is accreted over the life of the related lease as an operating expense. All of the Company’s existing asset retirement obligations are
associated with commitments to return property subject to operating leases to original condition upon lease termination.
The following table reconciles changes in the Company’s asset retirement liabilities for fiscal 2004 and 2005 (in millions):
Cumulative Effects of Accounting Changes
In 2003, the Company recognized a net favorable cumulative effect type adjustment of approximately $1 million from the adoption of SFAS
No. 150,
Accounting for Certain Financial Instruments with Characteristic of Both Liabilities and Equity and SFAS No. 143.
Long-Lived Assets Including Goodwill and Other Acquired Intangible Assets
The Company reviews property, plant, and equipment and certain identifiable intangibles, excluding goodwill, for impairment whenever events
or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability of these assets is measured by
comparison of its carrying amount 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 equals the amount by which the carrying value
of the assets exceeds its fair market value. For the three fiscal years ended September 24, 2005, the Company had no material impairment of its
long-lived assets, except for the impairment of certain assets in connection with the restructuring actions described in Note 5 of these Notes to
Consolidated Financial Statements.
SFAS No. 142, Goodwill and Other Intangible Assets requires that goodwill and intangible assets with indefinite useful lives should not be
amortized but rather be tested for impairment at least annually or sooner whenever events or changes in circumstances indicate that they may
be impaired. The Company performs its goodwill impairment tests on or about August 30 of each year. The Company did not recognize any
goodwill or intangible asset impairment charges in 2005, 2004, or 2003. The Company established reporting units based on its current reporting
structure. For purposes of testing goodwill for
66
Asset retirement liability as of September 27, 2003
$
7.2
Additional asset retirement obligations recognized
0.5
Accretion recognized
0.5
Asset retirement liability as of September 25, 2004
$
8.2
Additional asset retirement obligations recognized
2.8
Accretion recognized
0.7
Asset retirement liability as of September 24, 2005
$
11.7