Apple 2008 Annual Report Download - page 51

Table of Contents
income that may be generated as a result of certain tax planning strategies, together with the tax effects of the deferred tax liabilities, will be
sufficient to fully recover the remaining deferred tax assets. The Company released a valuation allowance of $5 million since it has been
determined that it is more likely than not the associated deferred tax assets will be realized. The Company will continue to evaluate the
realizability of deferred tax assets quarterly by assessing the need for and amount of the valuation allowance.
The Internal Revenue Service (the “IRS”) has completed its field audit of the Company’s federal income tax returns for the years 2002 through
2003 and proposed certain adjustments. The Company has contested certain of these adjustments through the IRS Appeals Office. All IRS audit
issues for years prior to 2002 have been resolved. In addition, the Company is subject to audits by state, local, and foreign tax
authorities. Management believes that adequate provision has been made for any adjustments that may result from tax examinations. However,
the outcome of tax audits cannot be predicted with certainty. If any issues addressed in the Company’s tax audits are resolved in a manner not
consistent with management’s expectations, the Company could be required to adjust its provision for income tax in the period such resolution
occurs.
Recent Accounting Pronouncements
In September 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 157, Fair Value Measurements, which defines fair
value, provides a framework for measuring fair value, and expands the disclosures required for fair value measurements. SFAS No. 157 applies
to other accounting pronouncements that require fair value measurements; it does not require any new fair value measurements. In February
2008, the FASB issued FASB Staff Position (“FSP”) No. FAS 157-1, Application of FASB Statement No. 157 to FASB Statement No. 13 and
Other Accounting Pronouncements That Address Fair Value Measurements for Purposes of Lease Classification or Measurement under
Statement 13 and FSP No. FAS 157-2 , Effective Date of FASB Statement No. 157 . FSP 157-1 amends SFAS No. 157 to remove certain leasing
transactions from its scope. FSP 157-2 delays the effective date of SFAS No. 157 to fiscal years beginning after November 15, 2008 for all non-
financial assets and non-financial liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a
recurring basis (at least annually) and will be adopted by the Company beginning in the first quarter of fiscal 2010. In October 2008, the FASB
issued FSP No. 157-3, Determining the Fair Value of a Financial Asset When the Market for That Asset is Not Active , to clarify the application
of SFAS 157 in inactive markets for financial assets. FSP 157-3 became effective upon issuance and SFAS No. 157 is effective for fiscal years
beginning after November 15, 2007 and will be adopted by the Company beginning in the first quarter of fiscal 2009. Although the Company
will continue to evaluate the application of SFAS No. 157, management does not currently believe adoption will have a material impact on the
Company’s financial condition or operating results.
In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities—including an
amendment of FASB Statement No. 115. SFAS No. 159 allows companies to choose to measure eligible financial instruments and certain other
items at fair value that are not required to be measured at fair value. SFAS No. 159 requires that unrealized gains and losses on items for which
the fair value option has been elected be reported in earnings at each reporting date. SFAS No. 159 is effective for fiscal years beginning after
November 15, 2007 and will be adopted by the Company beginning in the first quarter of fiscal 2009. Although the Company will continue to
evaluate the application of SFAS No. 159, management does not currently believe adoption will have a material impact on the Company’s
financial condition or operating results.
In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations , which establishes principles and requirements for
how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any
noncontrolling interest in the acquiree in a business combination. SFAS No. 141R also establishes principles around how goodwill acquired in a
business combination or a gain from a bargain purchase should be recognized and measured, as well as provides guidelines on the disclosure
requirements on the nature and financial impact of the business combination. SFAS No. 141R is effective for fiscal years beginning on or after
December 15, 2008 and will be adopted by the Company beginning in the first quarter of fiscal 2010. Although the Company will continue to
evaluate the application of SFAS No. 141R, management does not currently believe adoption will have a material impact on the Company’s
financial condition or operating results.
48