Apple 2015 Annual Report Download - page 39

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To provide a meaningful assessment of the foreign currency risk associated with certain of the Company’s foreign currency derivative
positions, the Company performed a sensitivity analysis using a value-at-risk (“VAR”) model to assess the potential impact of fluctuations
in exchange rates. The VAR model consisted of using a Monte Carlo simulation to generate thousands of random market price paths
assuming normal market conditions. The VAR is the maximum expected loss in fair value, for a given confidence interval, to the
Company’s foreign currency derivative positions due to adverse movements in rates. The VAR model is not intended to represent actual
losses but is used as a risk estimation and management tool. The model assumes normal market conditions. Forecasted transactions,
firm commitments and assets and liabilities denominated in foreign currencies were excluded from the model. Based on the results of the
model, the Company estimates with 95% confidence a maximum one-day loss in fair value of $342 million as of September 26, 2015
compared to a maximum one-day loss in fair value of $240 million as of September 27, 2014. Because the Company uses foreign
currency instruments for hedging purposes, the loss in fair value incurred on those instruments are generally offset by increases in the fair
value of the underlying exposures.
Actual future gains and losses associated with the Company’s investment portfolio and derivative positions may differ materially from the
sensitivity analyses performed as of September 26, 2015 due to the inherent limitations associated with predicting the timing and amount
of changes in interest rates, foreign currency exchanges rates and the Company’s actual exposures and positions.
Apple Inc. | 2015 Form 10-K | 37