Apple 2015 Annual Report Download - page 52

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2014
Adjusted
Cost Unrealized
Gains Unrealized
Losses Fair
Value
Cash and
Cash
Equivalents
Short-Term
Marketable
Securities
Long-Term
Marketable
Securities
Cash $ 10,232 $ 0 $ 0 $ 10,232 $ 10,232 $ 0 $ 0
Level 1:
Money market funds 1,546 0 0 1,546 1,546 0 0
Mutual funds 2,531 1 (132) 2,400 0 2,400 0
Subtotal 4,077 1 (132) 3,946 1,546 2,400 0
Level 2:
U.S. Treasury securities 23,140 15 (9) 23,146 12 607 22,527
U.S. agency securities 7,373 3 (11) 7,365 652 157 6,556
Non-U.S. government securities 6,925 69 (69) 6,925 0 204 6,721
Certificates of deposit and time deposits 3,832 0 0 3,832 1,230 1,233 1,369
Commercial paper 475 0 0 475 166 309 0
Corporate securities 85,431 296 (241) 85,486 6 6,298 79,182
Municipal securities 940 8 0 948 0 0 948
Mortgage- and asset-backed securities 12,907 26 (49) 12,884 0 25 12,859
Subtotal 141,023 417 (379) 141,061 2,066 8,833 130,162
Total $ 155,332 $ 418 $ (511) $ 155,239 $ 13,844 $ 11,233 $ 130,162
The Company may sell certain of its marketable securities prior to their stated maturities for strategic reasons including, but not limited to,
anticipation of credit deterioration and duration management. The maturities of the Company’s long-term marketable securities generally
range from one to five years.
As of September 26, 2015, the Company considers the declines in market value of its marketable securities investment portfolio to be
temporary in nature and does not consider any of its investments other-than-temporarily impaired. The Company typically invests in
highly-rated securities, and its investment policy generally limits the amount of credit exposure to any one issuer. The policy generally
requires investments to be investment grade, with the primary objective of minimizing the potential risk of principal loss. Fair values were
determined for each individual security in the investment portfolio. When evaluating an investment for other-than-temporary impairment
the Company reviews factors such as the length of time and extent to which fair value has been below its cost basis, the financial
condition of the issuer and any changes thereto, changes in market interest rates and the Company’s intent to sell, or whether it is more
likely than not it will be required to sell the investment before recovery of the investment’s cost basis.
Derivative Financial Instruments
The Company may use derivatives to partially offset its business exposure to foreign currency and interest rate risk on expected future
cash flows, on net investments in certain foreign subsidiaries and on certain existing assets and liabilities. However, the Company may
choose not to hedge certain exposures for a variety of reasons including, but not limited to, accounting considerations and the prohibitive
economic cost of hedging particular exposures. There can be no assurance the hedges will offset more than a portion of the financial
impact resulting from movements in foreign currency exchange or interest rates.
To help protect gross margins from fluctuations in foreign currency exchange rates, certain of the Company’s subsidiaries whose
functional currency is the U.S. dollar may hedge a portion of forecasted foreign currency revenue, and subsidiaries whose functional
currency is not the U.S. dollar and who sell in local currencies may hedge a portion of forecasted inventory purchases not denominated in
the subsidiaries’ functional currencies. The Company may enter into forward contracts, option contracts or other instruments to manage
this risk and may designate these instruments as cash flow hedges. The Company typically hedges portions of its forecasted foreign
currency exposure associated with revenue and inventory purchases, typically for up to 12 months.
To help protect the net investment in a foreign operation from adverse changes in foreign currency exchange rates, the Company may
enter into foreign currency forward and option contracts to offset the changes in the carrying amounts of these investments due to
fluctuations in foreign currency exchange rates. In addition, the Company may use non-derivative financial instruments, such as its foreign
currency-denominated debt, as economic hedges of its net investments in certain foreign subsidiaries. In both of these cases, the
Company designates these instruments as net investment hedges.
Apple Inc. | 2015 Form 10-K | 50