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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 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 R&D, corporate marketing expenses, share-based compensation expense,
income taxes, various nonrecurring charges, 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 $484 million, $495 million and $858 million for 2014, 2013 and 2012, respectively. The
Company’s total depreciation and amortization was $7.9 billion, $6.8 billion and $3.3 billion in 2014, 2013 and 2012,
respectively, of which $441 million, $382 million and $319 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.
As the Company continues to expand its business, management believes collaboration across its online, Retail and indirect
channels is integral to better serve its customers and optimize its financial results. Beginning in the first quarter of 2015,
management will be assessing business performance and making decisions on a geographic basis, including the results of its
retail stores in each respective geographic segment. Accordingly, the Company will be changing its reportable segments to
align with the way the business is managed. The Company’s reportable operating segments will consist of the Americas,
Europe, Greater China, Japan and Rest of Asia Pacific operations, and the Retail segment will no longer be classified as a
separate reportable segment. The historical segment data for prior periods will be reclassified to reflect this change beginning in
the Quarterly Report on Form 10-Q for the quarter ending December 27, 2014.
Apple Inc. | 2014 Form 10-K | 77