Apple 2011 Annual Report Download - page 53

basis over the requisite service period. The Company recognizes a benefit from share-
based compensation in the Consolidated Statements of
Shareholders’ Equity if an incremental tax benefit is realized. In addition, the Company recognizes the indirect effects of share-
based
compensation on research and development tax credits, foreign tax credits and domestic manufacturing deductions in the Consolidated
Statements of Operations. Further information regarding share-based compensation can be found in Note 6, “Shareholders’ Equity and Share-
based Compensation” of this Form 10-K.
Income Taxes
The provision for income taxes is computed using the asset and liability method, under which deferred tax assets and liabilities are recognized
for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for
operating losses and tax credit carryforwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates that apply to
taxable income in effect for the years in which those tax assets are expected to be realized or settled. The Company records a valuation
allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.
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
5, “Income Taxes” of this Form 10-K for additional information.
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 24, 2011 (in
thousands, except net income in millions and per share amounts):
Potentially dilutive securities representing 1.7 million, 1.6 million and 12.6 million shares of common stock for 2011, 2010 and 2009,
respectively, were excluded from the computation of diluted earnings per common share for these periods because their effect would have been
antidilutive.
51
2011
2010
2009
Numerator:
Net income
$
25,922
$
14,013
$
8,235
Denominator:
Weighted
-
average shares outstanding
924,258
909,461
893,016
Effect of dilutive securities
12,387
15,251
13,989
Weighted
-
average diluted shares
936,645
924,712
907,005
Basic earnings per common share
$
28.05
$
15.41
$
9.22
Diluted earnings per common share
$
27.68
$
15.15
$
9.08