Apple 2009 Annual Report Download - page 86

Table of Contents
major facility leases are generally for terms of one to 20 years and generally provide renewal options for terms of one to five additional years.
Leases for retail space are for terms of five to 20 years, the majority of which are for ten years, and often contain multi-
year renewal options. As
of September 26, 2009, the Company’
s total future minimum lease payments under noncancelable operating leases were $1.9 billion, of which
$1.5 billion related to leases for retail space.
Rent expense under all operating leases, including both cancelable and noncancelable leases, was $231 million, $207 million and $151 million in
2009, 2008 and 2007, respectively. Future minimum lease payments under noncancelable operating leases having remaining terms in excess of
one year as of September 26, 2009, are as follows (in millions):
Accrued Warranty and Indemnifications
The Company offers a basic limited parts and labor warranty on its hardware products. The basic warranty period for hardware products is
typically one year from the date of purchase by the end-user. The Company also offers a 90-
day basic warranty for its service parts used to repair
the Company’
s hardware products. The Company provides currently for the estimated cost that may be incurred under its basic limited product
warranties at the time related revenue is recognized. Factors considered in determining appropriate accruals for product warranty obligations
include the size of the installed base of products subject to warranty protection, historical and projected warranty claim rates, historical and
projected cost-per-claim, and knowledge of specific product failures that are outside of the Company’
s typical experience. The Company
assesses the adequacy of its preexisting warranty liabilities and adjusts the amounts as necessary based on actual experience and changes in
future estimates. For products accounted for under subscription accounting, the Company recognizes warranty expense as incurred.
The Company periodically provides updates to its applications and system software to maintain the software’
s compliance with published
specifications. The estimated cost to develop such updates is accounted for as warranty costs that are recognized at the time related software
revenue is recognized. Factors considered in determining appropriate accruals related to such updates include the number of units delivered, the
number of updates expected to occur, and the historical cost and estimated future cost of the resources necessary to develop these updates.
The following table reconciles changes in the Company’
s accrued warranties and related costs for the three years ended September 26, 2009 (in
millions):
The Company generally does not indemnify end-
users of its operating system and application software against legal claims that the software
infringes third-
party intellectual property rights. Other agreements entered into by the Company sometimes include indemnification provisions
under which the Company could be subject to costs and/or damages in the event of an infringement claim against the Company or an
indemnified third-party.
83
Years
2010
$
222
2011
234
2012
228
2013
214
2014
199
Thereafter
825
Total minimum lease payments
$
1,922
2009 2008 2007
Beginning accrued warranty and related costs
$
267
$
230
$
284
Cost of warranty claims
(294
)
(319
)
(281
)
Accruals for product warranties
237
356
227
Ending accrued warranty and related costs
$
210
$
267
$
230