Apple 2011 Annual Report Download - page 41

Other Obligations
Other outstanding obligations were $2.4 billion as of September 24, 2011, and were comprised mainly of commitments under long-
term supply
agreements to make additional inventory component prepayments and to acquire capital equipment, commitments to acquire product tooling and
manufacturing process equipment, and commitments related to advertising, research and development, Internet and telecommunications services
and other obligations.
The Company’s other non-
current liabilities in the Consolidated Balance Sheets consist primarily of deferred tax liabilities, gross unrecognized
tax benefits and the related gross interest and penalties. As of September 24, 2011, the Company had non-
current deferred tax liabilities of $8.2
billion. Additionally, as of September 24, 2011, the Company had gross unrecognized tax benefits of $1.4 billion and an additional $261 million
for gross interest and penalties classified as non-
current liabilities. At this time, the Company is unable to make a reasonably reliable estimate of
the timing of payments in individual years in connection with these tax liabilities; therefore, such amounts are not included in the above
contractual obligation table.
Indemnification
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. However, the Company has not been required to make any significant payments resulting from such an infringement
claim asserted against it or an indemnified third-
party. In the opinion of management, there was not at least a reasonable possibility the Company
may have incurred a material loss with respect to indemnification of end-
users of its operating system or application software for infringement of
third-
party intellectual property rights. The Company did not record a liability for infringement costs related to indemnification as of either
September 24, 2011 or September 25, 2010.
The Company has entered into indemnification agreements with its directors and executive officers. Under these agreements, the Company has
agreed to indemnify such individuals to the fullest extent permitted by law against liabilities that arise by reason of their status as directors or
officers and to advance expenses incurred by such individuals in connection with related legal proceedings. It is not possible to determine the
maximum potential amount of payments the Company could be required to make under these agreements due to the limited history of prior
indemnification claims and the unique facts and circumstances involved in each claim. However, the Company maintains directors and officers
liability insurance coverage to reduce its exposure to such obligations, and payments made under these agreements historically have not been
material.
Interest Rate and Foreign Currency Risk Management
The Company regularly reviews its foreign exchange forward and option positions, both on a stand-
alone basis and in conjunction with its
underlying foreign currency and interest rate related exposures. Given the effective horizons of the Company’
s risk management activities and
the anticipatory nature of the exposures, there can be no assurance these positions will offset more than a portion of the financial impact resulting
from movements in either foreign exchange or interest rates. Further, the recognition timing of gains and losses related to these instruments for
any given period may not coincide with the timing of gains and losses related to the underlying economic exposures and, therefore, may
adversely affect the Company’s financial condition and operating results.
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Item 7A.
Quantitative and Qualitative Disclosures About Market Risk