Apple 2014 Annual Report Download - page 52

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Notes to Consolidated Financial Statements
Note 1 – Summary of Significant Accounting Policies
Apple Inc. and its wholly-owned subsidiaries (collectively “Apple” or the “Company”) designs, manufactures and markets
mobile communication and media devices, personal computers and portable digital music players, and sells a variety of related
software, services, accessories, networking solutions and third-party digital content and applications. The Company sells its
products worldwide through its retail stores, online stores and direct sales force, as well as through third-party cellular network
carriers, wholesalers, retailers and value-added resellers. In addition, the Company sells a variety of third-party iPhone, iPad,
Mac and iPod compatible products, including application software, and various accessories through its online and retail stores.
The Company sells to consumers, small and mid-sized businesses, and education, enterprise and government customers.
Basis of Presentation and Preparation
The accompanying consolidated financial statements include the accounts of the Company. Intercompany accounts and
transactions have been eliminated. The preparation of these consolidated financial statements in conformity with U.S. generally
accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the amounts
reported in these consolidated financial statements and accompanying notes. Actual results could differ materially from those
estimates.
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 2014, 2013 and 2012 ended on September 27, 2014, September 28, 2013 and September 29, 2012, respectively. An
additional week is included in the first fiscal quarter approximately every six years to realign fiscal quarters with calendar
quarters. Fiscal years 2014 and 2013 spanned 52 weeks each. Fiscal year 2012 spanned 53 weeks, with a 14th week included
in the first quarter of 2012. Unless otherwise stated, references to particular years, quarters, months and periods refer to the
Company’s fiscal years ended in September and the associated quarters, months and periods of those fiscal years.
During the first quarter of 2014, the Company adopted updated accounting standards that (i) required disclosure of additional
information about the amounts reclassified out of accumulated other comprehensive income (“AOCI”) by component and
(ii) required gross and net disclosures about offsetting assets and liabilities. The adoption of these updated standards only
impacted the disclosures in the Notes to Consolidated Financial Statements; accordingly, the adoption had no impact on the
Company’s financial position or results of operations. The Company has provided these additional disclosures in this
Form 10-K in Note 8, “Comprehensive Income” and Note 2, “Financial Instruments,” respectively.
Common Stock Split
On June 6, 2014, the Company effected a seven-for-one stock split to shareholders of record as of June 2, 2014. All share and
per share information has been retroactively adjusted to reflect the stock split.
Revenue Recognition
Net sales consist primarily of revenue from the sale of hardware, software, digital content and applications, accessories and
service and support contracts. The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery
has occurred, the sales price is fixed or determinable and collection is probable. Product is considered delivered to the
customer once it has been shipped and title, risk of loss and rewards of ownership have been transferred. For most of the
Company’s product sales, these criteria are met at the time the product is shipped. For online sales to individuals, for some
sales to education customers in the U.S., and for certain other sales, the Company defers revenue until the customer receives
the product because the Company retains a portion of the risk of loss on these sales during transit. The Company recognizes
revenue from the sale of hardware products, software bundled with hardware that is essential to the functionality of the
hardware, and third-party digital content sold on the iTunes Store in accordance with general revenue recognition accounting
guidance. The Company recognizes revenue in accordance with industry specific software accounting guidance for the
following types of sales transactions: (i) standalone sales of software products, (ii) sales of software upgrades and (iii) sales of
software bundled with hardware not essential to the functionality of the hardware.
Apple Inc. | 2014 Form 10-K | 50