Apple 2011 Annual Report Download - page 55

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Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation is computed by use of the straight-
line method over the estimated useful lives of
the assets, which for buildings is the lesser of 30 years or the remaining life of the underlying building, up to five years for equipment, and the
shorter of lease terms or ten years for leasehold improvements. The Company capitalizes eligible costs to acquire or develop internal-
use
software that are incurred subsequent to the preliminary project stage. Capitalized costs related to internal-
use software are amortized using the
straight-
line method over the estimated useful lives of the assets, which range from three to five years. Depreciation and amortization expense on
property and equipment was $1.6 billion, $815 million and $606 million during 2011, 2010 and 2009, respectively.
Long-Lived Assets Including Goodwill and Other Acquired Intangible Assets
The Company reviews property, plant and equipment and certain identifiable intangibles, excluding goodwill, for impairment. Long-
lived assets
are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable.
Recoverability of these assets is measured by comparison of their carrying amounts to future undiscounted cash flows the assets are expected to
generate. If property, plant and equipment and certain identifiable intangibles are considered to be impaired, the impairment to be recognized
equals the amount by which the carrying value of the assets exceeds its fair market value. The Company did not record any significant
impairments during 2011, 2010 and 2009.
The Company does not amortize goodwill and intangible assets with indefinite useful lives, rather such assets are required to be tested for
impairment at least annually or sooner whenever events or changes in circumstances indicate that the assets may be impaired. The Company
performs its goodwill and intangible asset impairment tests in the fourth quarter of each fiscal year. The Company did not recognize any
goodwill or intangible asset impairment charges in 2011, 2010 and 2009. The Company established reporting units based on its current reporting
structure. For purposes of testing goodwill for impairment, goodwill has been allocated to these reporting units to the extent it relates to each
reporting unit.
The Company amortizes its intangible assets with definite lives over their estimated useful lives and reviews these assets for impairment. The
Company is currently amortizing its acquired intangible assets with definite lives over periods generally ranging between three to seven years.
Fair Value Measurements
The Company applies fair value accounting for all financial assets and liabilities and non-
financial assets and liabilities that are recognized or
disclosed at fair value in the financial statements on a recurring basis. The Company defines fair value as the price that would be received from
selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining
the fair value measurements for assets and liabilities, which are required to be recorded at fair value, the Company considers the principal or
most advantageous market in which the Company would transact and the market-
based risk measurements or assumptions that market
participants would use in pricing the asset or liability, such as risks inherent in valuation techniques, transfer restrictions and credit risk. Fair
value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the
categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:
Level 1
– Quoted prices in active markets for identical assets or liabilities.
Level 2
–
Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar
assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the
full term of the assets or liabilities.
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