Apple 2010 Annual Report Download - page 79

Download and view the complete annual report

Please find page 79 of the 2010 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 118

  • 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
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118

Table of Contents
major facility leases are typically for terms not exceeding 10 years and generally provide renewal options for terms not exceeding five additional
years. Leases for retail space are for terms ranging from five to 20 years, the majority of which are for ten years, and often contain multi
-
year
renewal options. As of September 25, 2010, the Company’
s total future minimum lease payments under noncancelable operating leases were
$2.1 billion, of which $1.7 billion related to leases for retail space.
Rent expense under all operating leases, including both cancelable and noncancelable leases, was $271 million, $231 million and $207 million in
2010, 2009 and 2008, respectively. Future minimum lease payments under noncancelable operating leases having remaining terms in excess of
one year as of September 25, 2010, 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 pre-
existing warranty liabilities and adjusts the amounts as necessary based on actual experience and changes in
future estimates.
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 warranty and related costs for the three years ended September 25, 2010 (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
76
Years
2011
$
266
2012
267
2013
260
2014
244
2015
226
Thereafter
826
Total minimum lease payments
$
2,089
2010
2009
2008
Beginning accrued warranty and related costs
$
577
$
671
$
363
Cost of warranty claims
(713
)
(534
)
(493
)
Accruals for product warranty
897
440
801
Ending accrued warranty and related costs
$
761
$
577
$
671