Apple 2012 Annual Report Download - page 30

valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be
realized.
The Company recognizes tax benefits from uncertain tax positions only if it is more likely than not that 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 ultimate settlement.
Management believes it is more likely than not that forecasted income, including income that may be generated
as a result of certain tax planning strategies, together with future reversals of existing taxable temporary
differences, will be sufficient to fully recover the deferred tax assets. In the event that the Company determines
all or part of the net deferred tax assets are not realizable in the future, the Company will make an adjustment to
the valuation allowance that would be charged to earnings in the period such determination is made. In addition,
the calculation of tax liabilities involves significant judgment in estimating the impact of uncertainties in the
application of GAAP and complex tax laws. Resolution of these uncertainties in a manner inconsistent with
management’s expectations could have a material impact on the Company’s financial condition and operating
results.
Legal and Other Contingencies
As discussed in Part I, Item 3 of this Form 10-K under the heading “Legal Proceedings” and in Part II, Item 8 of
this Form 10-K in the Notes to Consolidated Financial Statements in Note 7, “Commitments and Contingencies,”
the Company is subject to various legal proceedings and claims, including those that arise in the ordinary course
of business. The Company records a liability when it is probable that a loss has been incurred and the amount is
reasonably estimable. There is significant judgment required in both the probability determination and as to
whether an exposure can be reasonably estimated. In the opinion of management, there was not at least a
reasonable possibility the Company may have incurred a material loss, or a material loss in excess of a recorded
accrual, with respect to loss contingencies for legal and other contingencies. However, the outcome of legal
proceedings and claims brought against the Company is subject to significant uncertainty. Therefore, although
management considers the likelihood of such an outcome to be remote, if one or more of these legal matters were
resolved against the Company in a reporting period for amounts in excess of management’s expectations, the
Company’s consolidated financial statements for that reporting period could be materially adversely affected.
Fiscal Period
The Company’s fiscal year is the 52 or 53-week period that ends on the last Saturday of September. The
Company’s fiscal years 2012, 2011 and 2010 ended on September 29, 2012, September 24, 2011, and
September 25, 2010, respectively. Fiscal year 2012 spanned 53 weeks, with a 14th week included in the first
quarter of 2012, as is done approximately every six years to realign the Company’s fiscal quarters more closely
to calendar quarters. Inclusion of the additional week in 2012 increased the Company’s overall net sales and
operating expenses for the year. Fiscal years 2011 and 2010 spanned 52 weeks each. Unless otherwise stated,
references to particular years or quarters refer to the Company’s fiscal years ended in September and the
associated quarters of those fiscal years.
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