Apple 2007 Annual Report Download - page 90

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generally consistent with the Company's other operating segments. The cost of sales of the Company's products sold through the Retail segment
is now reflected at amounts similar to the cost of sales of the same products reflected in the Company's other operating segments. Revenue from
APP and .Mac contracts sold through the Retail segment is now being recognized over the lives of the respective service agreements.
Additionally, the Retail segment is applying the same subscription accounting to iPhone net sales and cost of sales that the Company's other
operating segments apply. Management believes aligning measurements for the performance of the Retail segment with those used for the
Company's other operating segments will provide greater comparability with the rest of the Company's segments and allow for more meaningful
assessment of the Retail segment's operating results. The Company has reclassified prior period operating segment results to reflect these
changes in the measurement of the operating results for the Retail segment, along with the corresponding offsetting impact to the Company's
other operating segments.
The Company will continue to allocate certain operating expenses associated with its high-profile stores to corporate marketing expense to
reflect the estimated Company-wide benefit. These high-profile stores are larger than the Company's typical retail stores and were designed to
further promote brand awareness and provide a venue for certain corporate sales and marketing activities, including corporate briefings. The
allocation of these operating costs to corporate expense is based on the amount incurred for a high-profile store in excess of that incurred by a
more typical Company retail location. The Company had opened a total of eight high-profile stores as of September 29, 2007. Expenses
allocated to corporate marketing resulting from the operations of high-profile stores were $39 million, $33 million, and $31 million for the years
ended September 29, 2007, September 30, 2006, and September 24, 2005 respectively.
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