Apple 2013 Annual Report Download - page 77

Note 11 – 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. The Company’s reportable operating
segments consist of the Americas, Europe, Greater China, Japan, Rest of Asia Pacific and Retail operations. The
Americas segment includes both North and South America. The Europe segment includes European countries, as
well as India, the Middle East and Africa. The Greater China segment includes China, Hong Kong and Taiwan.
The Rest of Asia Pacific segment includes Australia and Asian countries, other than those countries included in
the Company’s other operating segments. The Retail segment operates Apple retail stores in 13 countries,
including the U.S. The results of the Company’s geographic segments do not include results of the Retail
segment. 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 through 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 research
and development, corporate marketing expenses, share-based compensation expense, income taxes, various
nonrecurring charges, and other separately managed general and administrative costs and certain manufacturing
period expenses. 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 $495
million, $858 million and $612 million for 2013, 2012 and 2011, respectively. The Company’s total depreciation
and amortization was $6.8 billion, $3.3 billion and $1.8 billion in 2013, 2012 and 2011, respectively, of which
$382 million, $319 million and $273 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.
75