Apple 2015 Annual Report Download - page 68

In addition to the commitments mentioned above, the Company had other off-balance sheet obligations of $7.3 billion as of
September 26, 2015 that consisted of commitments to acquire capital assets, including product tooling and manufacturing process
equipment, and commitments related to inventory prepayments, advertising, licensing, R&D, internet and telecommunications services,
energy and other obligations.
Contingencies
The Company is subject to various legal proceedings and claims that have arisen in the ordinary course of business and that have not
been fully adjudicated, certain of which are discussed in Part I, Item 1A of this Form 10-K under the heading “Risk Factors” and in Part I,
Item 3 of this Form 10-K under the heading “Legal Proceedings.” In the opinion of management, there was not at least a reasonable
possibility the Company may have incurred a material loss, or a material loss in excess of a recorded accrual, with respect to loss
contingencies for asserted legal and other claims. However, the outcome of litigation is inherently uncertain. Therefore, although
management considers the likelihood of such an outcome to be remote, if one or more of these legal matters were resolved against the
Company in a reporting period for amounts in excess of management’s expectations, the Company’s consolidated financial statements
for that reporting period could be materially adversely affected.
Apple Inc. v. Samsung Electronics Co., Ltd, et al.
On August 24, 2012, a jury returned a verdict awarding the Company $1.05 billion in its lawsuit against Samsung Electronics Co., Ltd and
affiliated parties in the United States District Court, Northern District of California, San Jose Division. On March 6, 2014, the District Court
entered final judgment in favor of the Company in the amount of approximately $930 million. On May 18, 2015, the U.S. Court of Appeals
for the Federal Circuit affirmed in part, and reversed in part, the decision of the District Court. As a result, the Court of Appeals ordered
entry of final judgment on damages in the amount of approximately $548 million, with the District Court to determine supplemental
damages and interest, as well as damages owed for products subject to the reversal in part. Because the ruling remains subject to further
proceedings, the Company has not recognized the award in its results of operations.
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 operating
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 and Rest of Asia Pacific. 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 those Asian countries not included in the Company’s
other reportable operating segments. Although each reportable operating segment provides similar hardware and software products and
similar services, they are managed separately to better align with the location of the Company’s customers and distribution partners and
the unique market dynamics of each geographic region. 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 reportable operating segments based on net sales and operating income. Net sales for
geographic segments are generally based on the location of customers and sales through the Company’s retail stores located in those
geographic locations. 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 reportable
operating segments. Costs excluded from segment operating income include various corporate expenses such as R&D, corporate marketing
expenses, certain share-based compensation expenses, income taxes, various nonrecurring charges and other separately managed general
and administrative costs. The Company does not include intercompany transfers between segments for management reporting purposes.
Apple Inc. | 2015 Form 10-K | 66