Apple 2014 Annual Report Download - page 57

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Long-Lived Assets Including Goodwill and Other Acquired Intangible Assets
The Company reviews property, plant and equipment, inventory component prepayments and certain identifiable intangibles,
excluding goodwill, for impairment. Long-lived assets are reviewed for impairment whenever events or changes in
circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability of these assets is measured by
comparison of their carrying amounts to future undiscounted cash flows the assets are expected to generate. If property, plant
and equipment, inventory component prepayments and certain identifiable intangibles are considered to be impaired, the
impairment to be recognized equals the amount by which the carrying value of the assets exceeds its fair value. The Company
did not record any significant impairments during 2014, 2013 and 2012.
The Company does not amortize goodwill and intangible assets with indefinite useful lives, rather such assets are required to be
tested for impairment at least annually or sooner whenever events or changes in circumstances indicate that the assets may be
impaired. The Company performs its goodwill and intangible asset impairment tests in the fourth quarter of each year. The
Company did not recognize any impairment charges related to goodwill or indefinite lived intangible assets during 2014, 2013
and 2012. The Company established reporting units based on its current reporting structure. For purposes of testing goodwill
for impairment, goodwill has been allocated to these reporting units to the extent it relates to each reporting unit. In 2014 and
2013, the Company’s goodwill was allocated to the Americas and Europe reportable operating segments.
The Company amortizes its intangible assets with definite useful lives over their estimated useful lives and reviews these assets
for impairment. The Company typically amortizes its acquired intangible assets with definite useful lives over periods 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 the Company’s debt instruments and 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.
Apple Inc. | 2014 Form 10-K | 55