Apple 2013 Annual Report Download - page 68

The aggregate changes in the balance of gross unrecognized tax benefits, which excludes interest and penalties,
for 2013, 2012 and 2011, is as follows (in millions):
2013 2012 2011
Beginning Balance ..................................................... $2,062 $1,375 $ 943
Increases related to tax positions taken during a prior year .................. 745 340 49
Decreases related to tax positions taken during a prior year ................. (118) (107) (39)
Increases related to tax positions taken during the current year .............. 626 467 425
Decreases related to settlements with taxing authorities .................... (592) (3) 0
Decreases related to expiration of statute of limitations .................... (9) (10) (3)
Ending Balance ....................................................... $2,714 $2,062 $1,375
The Company includes interest and penalties related to unrecognized tax benefits within the provision for income
taxes. As of September 28, 2013 and September 29, 2012, the total amount of gross interest and penalties accrued
was $590 million and $401 million, respectively, which is classified as non-current liabilities in the Consolidated
Balance Sheets. In connection with tax matters, the Company recognized interest and penalty expense in 2013,
2012 and 2011 of $189 million, $140 million and $14 million, respectively.
The Company is subject to taxation and files income tax returns in the U.S. federal jurisdiction and in many state
and foreign jurisdictions. For U.S. federal income tax purposes, all years prior to 2004 are closed. The Internal
Revenue Service (the “IRS”) has completed its field audit of the Company’s federal income tax returns for the
years 2004 through 2006 and proposed certain adjustments. The Company has contested certain of these
adjustments through the IRS Appeals Office. The IRS is currently examining the years 2007 through 2012. In
addition, the Company is also subject to audits by state, local and foreign tax authorities. In major states and
major foreign jurisdictions, the years subsequent to 1989 and 2002, respectively, generally remain open and
could be subject to examination by the taxing authorities.
Management believes that an adequate provision has been made for any adjustments that may result from tax
examinations. However, the outcome of tax audits cannot be predicted with certainty. If any issues addressed in
the Company’s tax audits are resolved in a manner not consistent with management’s expectations, the Company
could be required to adjust its provision for income tax in the period such resolution occurs. Although timing of
the resolution and/or closure of audits is not certain, the Company believes it is reasonably possible that tax audit
resolutions could reduce its unrecognized tax benefits by between $125 million and $225 million in the next
12 months.
Note 6 – Long-Term Debt
In May 2013, the Company issued floating- and fixed-rate notes with varying maturities for an aggregate
principal amount of $17.0 billion (collectively the “Notes”). The Notes are senior unsecured obligations, and
interest is payable in arrears, quarterly for the floating-rate notes and semi-annually for the fixed-rate notes.
The principal amounts and associated interest rates of the Notes as of September 28, 2013, are as follows:
Amount
(in millions)
Effective
Rate
Floating-rate notes, due 2016 ................................................. $ 1,000 0.51%
Floating-rate notes, due 2018 ................................................. 2,000 1.10%
Fixed-rate 0.45% notes due 2016 .............................................. 1,500 0.51%
Fixed-rate 1.00% notes due 2018 .............................................. 4,000 1.08%
Fixed-rate 2.40% notes due 2023 .............................................. 5,500 2.44%
Fixed-rate 3.85% notes due 2043 .............................................. 3,000 3.91%
Total ................................................................ $17,000
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