Apple 2011 Annual Report Download - page 71

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The Company did not assume any stock options in conjunction with business combinations during 2011 or 2009. During 2010, the Company
assumed 98,000 stock options, which had a weighted-average fair value of $216.82 per share.
The weighted-average fair value of stock purchase rights per share was $71.47, $45.03 and $30.62 during 2011, 2010 and 2009, respectively.
The following table provides a summary of the share-
based compensation expense included in the Consolidated Statements of Operations for the
three years ended September 24, 2011 (in millions):
The income tax benefit related to share-
based compensation expense was $467 million, $314 million and $266 million for 2011, 2010 and 2009,
respectively. As of September 24, 2011, the total unrecognized compensation cost related to outstanding stock options and RSUs was $2.6
billion, which the Company expects to recognize over a weighted-average period of 3.7 years.
Note 7 – Commitments and Contingencies
Accrued Warranty and Indemnification
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 following table reconciles changes in the Company’
s accrued warranty and related costs for the three years ended September 24, 2011 (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. 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
69
2011
2010
2009
Cost of sales
$
200
$
151
$
114
Research and development
450
323
258
Selling, general and administrative
518
405
338
Total share
-
based compensation expense
$
1,168
$
879
$
710
2011
2010
2009
Beginning accrued warranty and related costs
$
761
$
577
$
671
Cost of warranty claims
(1,147
)
(713
)
(534
)
Accruals for product warranty
1,626
897
440
Ending accrued warranty and related costs
$
1,240
$
761
$
577