Apple 2009 Annual Report Download - page 68

Table of Contents
interpretation of FASB Statement No. 109)
, which changed the framework for accounting for uncertainty in income taxes. The Company
recognizes the tax benefit from an uncertain tax position only if it is more likely than not the tax position will be sustained on examination by the
taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are
then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon settlement. See Note 6, “Income Taxes”
for additional information, including the effects of adoption on the Company’s consolidated financial statements.
Earnings Per Common Share
Basic earnings per common share is computed by dividing income available to common shareholders by the weighted-
average number of shares
of common stock outstanding during the period. Diluted earnings per common share is computed by dividing income available to common
shareholders by the weighted-
average number of shares of common stock outstanding during the period increased to include the number of
additional shares of common stock that would have been outstanding if the potentially dilutive securities had been issued. Potentially dilutive
securities include outstanding stock options, shares to be purchased under the employee stock purchase plan and unvested RSUs. The dilutive
effect of potentially dilutive securities is reflected in diluted earnings per common share by application of the treasury stock method. Under the
treasury stock method, an increase in the fair market value of the Company’
s common stock can result in a greater dilutive effect from
potentially dilutive securities.
The following table sets forth the computation of basic and diluted earnings per common share for the three years ended September 26, 2009 (in
thousands, except net income in millions and per share amounts):
Potentially dilutive securities representing 12.6 million, 10.3 million and 13.7 million shares of common stock for 2009, 2008 and 2007,
respectively, were excluded from the computation of diluted earnings per common share for these periods because their effect would have been
antidilutive.
Comprehensive Income
Comprehensive income consists of two components, net income and other comprehensive income. Other comprehensive income refers to
revenue, expenses, gains and losses that under GAAP are recorded as an element of shareholders’
equity but are excluded from net income. The
Company’
s other comprehensive income consists of foreign currency translation adjustments from those subsidiaries not using the U.S. dollar as
their functional currency, unrealized gains and losses on marketable securities categorized as available-for-
sale, and net deferred gains and losses
on certain derivative instruments accounted for as cash flow hedges.
Segment Information
The Company reports segment information based on the “management”
approach. The management approach designates the internal reporting
used by management for making decisions and assessing performance as the source of the Company’
s reportable segments. Information about
the Company’s products, major customers and geographic areas on a company-wide basis is also disclosed.
65
2009
2008
2007
Numerator:
Net income
$
5,704
$
4,834
$
3,496
Denominator:
Weighted
-
average shares outstanding
893,016
881,592
864,595
Effect of dilutive securities
13,989
20,547
24,697
Weighted
-
average shares diluted
907,005
902,139
889,292
Basic earnings per common share
$
6.39
$
5.48
$
4.04
Diluted earnings per common share
$
6.29
$
5.36
$
3.93