Apple 2012 Annual Report Download - page 54

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 typically from 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.
Level 3 – Inputs that are generally unobservable and typically reflect management’s estimate of assumptions that
market participants would use in pricing the asset or liability.
The Company’s valuation techniques used to measure the fair value of money market funds and certain
marketable equity securities were derived from quoted prices in active markets for identical assets or liabilities.
The valuation techniques used to measure the fair value of all other financial instruments, all of which have
counterparties with high credit ratings, were valued based on quoted market prices or model driven valuations
using significant inputs derived from or corroborated by observable market data.
In accordance with the fair value accounting requirements, companies may choose to measure eligible financial
instruments and certain other items at fair value. The Company has not elected the fair value option for any
eligible financial instruments.
Foreign Currency Translation and Remeasurement
The Company translates the assets and liabilities of its non-U.S. dollar functional currency subsidiaries into U.S.
dollars using exchange rates in effect at the end of each period. Revenue and expenses for these subsidiaries are
translated using rates that approximate those in effect during the period. Gains and losses from these translations
are recognized in foreign currency translation included in accumulated other comprehensive income in
shareholders’ equity. The Company’s subsidiaries that use the U.S. dollar as their functional currency remeasure
monetary assets and liabilities at exchange rates in effect at the end of each period, and inventories, property, and
nonmonetary assets and liabilities at historical rates. Gains and losses from these remeasurements were not
significant and have been included in the Company’s results of operations.
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