Apple 2014 Annual Report Download - page 66

Download and view the complete annual report

Please find page 66 of the 2014 Apple annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 117

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117

The foreign provision for income taxes is based on foreign pre-tax earnings of $33.6 billion, $30.5 billion and $36.8 billion in
2014, 2013 and 2012, respectively. The Company’s consolidated financial statements provide for any related tax liability on
undistributed earnings that the Company does not intend to be indefinitely reinvested outside the U.S. Substantially all of the
Company’s undistributed international earnings intended to be indefinitely reinvested in operations outside the U.S. were
generated by subsidiaries organized in Ireland, which has a statutory tax rate of 12.5%. As of September 27, 2014, U.S.
income taxes have not been provided on a cumulative total of $69.7 billion of such earnings. The amount of unrecognized
deferred tax liability related to these temporary differences is estimated to be approximately $23.3 billion.
As of September 27, 2014 and September 28, 2013, $137.1 billion and $111.3 billion, respectively, of the Company’s cash,
cash equivalents and marketable securities were held by foreign subsidiaries and are generally based in U.S.
dollar-denominated holdings. Amounts held by foreign subsidiaries are generally subject to U.S. income taxation on repatriation
to the U.S.
A reconciliation of the provision for income taxes, with the amount computed by applying the statutory federal income tax rate
(35% in 2014, 2013 and 2012) to income before provision for income taxes for 2014, 2013 and 2012, is as follows (dollars in
millions):
2014 2013 2012
Computed expected tax $18,719 $17,554 $19,517
State taxes, net of federal effect 469 508 677
Indefinitely invested earnings of foreign subsidiaries (4,744) (4,614) (5,895)
Research and development credit, net (88) (287) (103)
Domestic production activities deduction (495) (308) (328)
Other 112 265 162
Provision for income taxes $13,973 $13,118 $14,030
Effective tax rate 26.1% 26.2% 25.2%
The Company’s income taxes payable have been reduced by the tax benefits from employee stock plan awards. For stock
options, the Company receives an income tax benefit calculated as the tax effect of the difference between the fair market
value of the stock issued at the time of the exercise and the exercise price. For RSUs, the Company receives an income tax
benefit upon the award’s vesting equal to the tax effect of the underlying stock’s fair market value. The Company had net
excess tax benefits from equity awards of $706 million, $643 million and $1.4 billion in 2014, 2013 and 2012, respectively,
which were reflected as increases to common stock.
Apple Inc. | 2014 Form 10-K | 64