Apple 2012 Annual Report Download - page 72

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. The results of the Americas, Europe, Japan and Asia-Pacific
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 13 countries, including the U.S. Each 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. Prior to 2012, the Company allocated to corporate expenses certain
costs associated with its high-profile retail stores that have been designed and built to promote brand awareness
and serve as vehicles for corporate sales and marketing activities. Beginning in 2012, the Company no longer
allocates these costs to corporate expenses and reclassified $102 million and $75 million of such costs from
corporate to Retail segment expenses for 2011 and 2010, respectively. The Company does not include
intercompany transfers between segments for management reporting purposes.
Segment assets include receivables and inventories, and for the Retail segment also includes capital assets.
Segment assets exclude corporate assets, such as cash and cash equivalents, short-term and long-term marketable
securities, vendor non-trade receivables, 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 and therefore are excluded from the geographic segment assets and
instead included in corporate assets. Cash payments for capital asset purchases by the Retail segment were $858
million, $612 million and $392 million for 2012, 2011 and 2010, respectively. The Company’s total depreciation
and amortization was $3.3 billion, $1.8 billion and $1.0 billion in 2012, 2011 and 2010, respectively, of which
$319 million, $273 million and $198 million was related to the Retail segment in the respective years.
Depreciation and amortization on segment assets included in the geographic segments was not significant.
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