Apple 2009 Annual Report Download - page 41

Download and view the complete annual report

Please find page 41 of the 2009 Apple annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 106

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106

Table of Contents
future rate at which deferred revenue and deferred costs are recognized in the Company’
s results of operations will change. Costs incurred by the
Company for engineering, sales, marketing and warranty are expensed as incurred.
The Company records reductions to revenue for estimated commitments related to price protection and for customer incentive programs,
including reseller and end-user rebates, and other sales programs and volume-
based incentives. For transactions involving price protection, the
Company recognizes revenue net of the estimated amount to be refunded, provided the refund amount can be reasonably and reliably estimated
and the other conditions for revenue recognition have been met. The Company’
s policy requires that, if refunds cannot be reliably estimated,
revenue is not recognized until reliable estimates can be made or the price protection lapses. For customer incentive programs, the estimated cost
of these programs is recognized at the later of the date at which the Company has sold the product or the date at which the program is offered.
The Company also records reductions to revenue for expected future product returns based on the Company’
s historical experience. Future
market conditions and product transitions may require the Company to increase customer incentive programs and incur incremental price
protection obligations that could result in additional reductions to revenue at the time such programs are offered. Additionally, certain customer
incentive programs require management to estimate the number of customers who will actually redeem the incentive. Management’
s estimates
are based on historical experience and the specific terms and conditions of particular incentive programs. If a greater than estimated proportion
of customers redeem such incentives, the Company would be required to record additional reductions to revenue, which would have a negative
impact on the Company’s results of operations.
Valuation and Impairment of Marketable Securities
The Company’s investments in available-for-
sale securities are reported at fair value. Unrealized gains and losses related to changes in the fair
value of investments are included in accumulated other comprehensive income, net of tax, as reported in the Company’
s Consolidated Balance
Sheets. Changes in the fair value of investments impact the Company’s net income only when such investments are sold or an other-than-
temporary impairment is recognized. Realized gains and losses on the sale of securities are determined by specific identification of each
security’s cost basis. The Company regularly reviews its investment portfolio to determine if any investment is other-than-
temporarily impaired
due to changes in credit risk or other potential valuation concerns, which would require the Company to record an impairment charge in the
period any such determination is made. In making this judgment, the Company evaluates, among other things, the duration and extent to which
the fair value of an investment is less than its cost, the financial condition of the issuer and any changes thereto, and the Company’
s intent to sell,
or whether it is more likely than not it will be required to sell, the investment before recovery of the investment’
s amortized cost basis. The
Company’s assessment on whether an investment is other-than-
temporarily impaired or not, could change in the future due to new developments
or changes in assumptions related to any particular investment.
Allowance for Doubtful Accounts
The Company distributes its products through third-
party distributors, cellular network carriers, and resellers and directly to certain education,
consumer, and enterprise customers. The Company generally does not require collateral from its customers; however, the Company will require
collateral in certain instances to limit credit risk. In addition, when possible the Company does attempt to limit credit risk on trade receivables
with credit insurance for certain customers in Latin America, Europe, Asia, and Australia, or by requiring third-
party financing, loans or leases to
support credit exposure. 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 that are not covered by collateral, third-party financing arrangements, or credit insurance are outstanding with the Company’
s
distribution and retail channel partners.
38