Apple 2007 Annual Report Download - page 73

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covered by collateral, third-party flooring arrangements, or credit insurance are outstanding with the Company's distribution and retail channel
partners. One customer accounted for approximately 11% of trade receivables as of September 29, 2007, while no customers accounted for more
than 10% of trade receivables as of September 30, 2006.
The following table summarizes the activity in the allowance for doubtful accounts (in millions):
Vendor Non-Trade Receivables
The Company has non-trade receivables from certain of its manufacturing vendors resulting from the sale of raw material components to these
manufacturing vendors who manufacture sub-assemblies or assemble final products for the Company. The Company purchases these raw
material components directly from suppliers. These non-trade receivables, which are included in the Consolidated Balance Sheets in other
current assets, totaled $2.4 billion and $1.6 billion as of September 29, 2007 and September 30, 2006, respectively. The Company does not
reflect the sale of these components in net sales and does not recognize any profits on these sales until the products are sold through to the end
customer at which time the profit is recognized as a reduction of cost of sales.
Derivative Financial Instruments
The Company uses derivatives to partially offset its business exposure to foreign exchange risk. Foreign currency forward and option contracts
are used to offset the foreign exchange risk on certain existing assets and liabilities and to hedge the foreign exchange risk on expected future
cash flows on certain forecasted revenue and cost of sales. The Company's accounting policies for these instruments are based on whether the
instruments are designated as hedge or non-hedge instruments. The Company records all derivatives on the balance sheet at fair value.
69
September 29,
2007
September 30,
2006
September 24,
2005
Beginning allowance balance
$
52
$
46
$
47
Charged to costs and expenses
12
17
8
Deductions
(17
)
(11
)
(9
)
Ending allowance balance
$
47
$
52
$
46