Apple 2008 Annual Report Download - page 69

Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 2—Financial Instruments (Continued)
In accordance with FASB Staff Position (“FSP”) FAS 115-1 and FAS 124-1, The Meaning of Other-Than-Temporary Impairment and Its
Application to Certain Investments,
the following table shows the gross unrealized losses and fair value for those investments that were in an
unrealized loss position as of September 27, 2008 and September 29, 2007, aggregated by investment category and the length of time that
individual securities have been in a continuous loss position (in millions):
The unrealized losses on the Company’s investments in U.S. Treasury and Agency Securities, U.S. Corporate Securities, and Foreign Securities
were caused primarily by changes in interest rates, specifically, widening credit spreads. The Company’s investment policy requires investments
to be rated single-A or better with the objective of minimizing the potential risk of principal loss. Therefore, the Company considers the declines
to be temporary in nature. Fair values were determined for each individual security in the investment portfolio. When evaluating the investments
for other-than-temporary impairment, the Company reviews factors such as the length of time and extent to which fair value has been below cost
basis, the financial condition of the issuer, and the Company’s ability and intent to hold the investment for a period of time, which may be
sufficient for anticipated recovery in market value. During 2008, the Company did not record any material impairment charges on its outstanding
securities. As of September 27, 2008, the Company does not consider any of its investments to be other-than-temporarily impaired.
Accounts Receivable
Trade Receivables
The Company distributes its products through third-party distributors and resellers and directly to certain education, consumer, and commercial
customers. The Company generally does not require collateral from its customers. In addition, when possible, the Company attempts to limit
credit risk on trade receivables with credit insurance for certain customers in Latin America, Europe, Asia, and Australia and by arranging with
third-party financing companies to provide flooring arrangements and other loan and lease programs to the Company’s direct customers. These
credit-financing arrangements are directly between the third-party financing company and the end customer. As such, the Company generally
does not assume any recourse or credit risk sharing related to any of these arrangements. However, considerable trade receivables not covered by
collateral, third-party flooring arrangements, or credit insurance are outstanding with the Company’s distribution and retail channel partners.
Trade receivables from two of the Company’s customers accounted for 15% and 10% of trade receivables as of September 27, 2008, while one
customer accounted for approximately 11% of trade receivables as of September 29, 2007.
66
2008
Less than 12 Months
12 Months or Greater
Total
Security Description
Fair Value
Unrealized
Loss
Fair Value
Unrealized
Loss
Fair Value
Unrealized
Loss
U.S. Treasury and Agency Securities
$
6,850
$
(13
)
$
—
$
—
$
6,850
$
(13
)
U.S. Corporate Securities
2,536
(31
)
1,030
(72
)
3,566
(103
)
Foreign Securities
321
—
118
(5
)
439
(5
)
Total
$
9,707
$
(44
)
$
1,148
$
(77
)
$
10,855
$
(121
)
2007
Less than 12 Months 12 Months or Greater Total
Security Description
Fair Value
Unrealized
Loss
Fair Value
Unrealized
Loss
Fair Value
Unrealized
Loss
U.S. Treasury and Agency Securities
$
338
$
—
$
—
$
—
$
338
$
—
U.S. Corporate Securities
2,521
(12
)
32
—
2,553
(12
)
Foreign Securities
474
(1
)
8
—
482
(1
)
Total
$
3,333
$
(13
)
$
40
$
—
$
3,373
$
(13
)