Apple 2011 Annual Report Download - page 74

Note 8 – Segment Information and Geographic Data
The Company reports segment information based on the “management”
approach. The management approach designates the internal reporting
used by management for making decisions and assessing performance as the source of the Company’s reportable segments.
The Company manages its business primarily on a geographic basis. Accordingly, the Company determined its reportable operating segments,
which are generally based on the nature and location of its customers, to be the Americas, Europe, Japan, Asia-
Pacific and Retail operations. The
results of the Americas, Europe, Japan and Asia-
Pacific reportable segments do not include results of the Retail segment. The Americas segment
includes both North and South America. The Europe segment includes European countries, as well as the Middle East and Africa. The Asia-
Pacific segment includes Australia and Asian countries, other than Japan. The Retail segment operates Apple retail stores in 11 countries. Each
reportable operating segment provides similar hardware and software products and similar services. The accounting policies of the various
segments are the same as those described in Note 1, “Summary of Significant Accounting Policies.”
The Company evaluates the performance of its operating segments based on net sales and operating income. Net sales for geographic segments
are generally based on the location of customers, while Retail segment net sales are based on sales from the Company’
s retail stores. Operating
income for each segment includes net sales to third parties, related cost of sales and operating expenses directly attributable to the segment.
Advertising expenses are generally included in the geographic segment in which the expenditures are incurred. Operating income for each
segment excludes other income and expense and certain expenses managed outside the operating segments. Costs excluded from segment
operating income include various corporate expenses, such as manufacturing costs and variances not included in standard costs, research and
development, corporate marketing expenses, share-
based compensation expense, income taxes, various nonrecurring charges, and other
separately managed general and administrative costs. The Company does not include intercompany transfers between segments for management
reporting purposes. Segment assets exclude corporate assets, such as cash and cash equivalents, short-term and long-
term marketable securities,
other long-
term investments, manufacturing and corporate facilities, product tooling and manufacturing process equipment, miscellaneous
corporate infrastructure, goodwill and other acquired intangible assets. Except for the Retail segment, capital asset purchases for long-
lived
assets are not reported to management by segment. Cash payments for capital asset purchases by the Retail segment were $612 million, $392
million and $369 million for 2011, 2010 and 2009, respectively.
The Company has certain retail stores that have been designed and built to serve as high-
profile venues to promote brand awareness and serve as
vehicles for corporate sales and marketing activities. Because of their unique design elements, locations and size, these stores require
substantially more investment than the Company’
s more typical retail stores. The Company allocates certain operating expenses associated with
its high-profile stores to corporate expense to reflect the estimated Company-
wide benefit. The allocation of these operating costs to corporate
expense is based on the amount incurred for a high-
profile store in excess of that incurred by a more typical Company retail location. The
Company had opened a total of 19 high-
profile stores as of September 24, 2011. Amounts allocated to corporate expense resulting from the
operations of high-profile stores were $102 million, $75 million and $65 million for 2011, 2010 and 2009, respectively.
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