SEC Comment Letter for Apple (AAPL) — Feb 18, 2010
Apple Inc.
Date: Feb. 18, 2010 · CIK: 0000320193 · Accession: 0000000000-10-009165
AI Filing Summary & Sentiment
Reasoning
File numbers found in text: 000-10030
Letter
Mail Stop 4561 Via Fax (408) 974-2023 February 18, 2010 Peter Oppenheimer Senior VP and Chief Financial Officer Apple Inc. 1 Infinite Loop Cupertino, CA 95014 Re: Apple Inc. Form 10-K/A for the Fiscal Year Ended September 26, 2009 Filed on January 25, 2010 File No. 000-10030
Dear Mr. Oppenheimer: We have reviewed the above-referenced filing and have the following comments. Please note that we have limited our review to only your financial statements and related disclosures and do not intend to expand our review to other portions of your document. If indicated, we think you should revise your document in response to these comments. If you disagree, we will consider your explanation as to why our comment is inapplicable or a revision is unnecessary. Please be as detailed as necessary in your explanation. In some of our comments, we may ask you to provide us with supplemental information so we may better understand your disclosure. After reviewing this information, we may raise additional comments. Please understand that the purpose of our re view process is to assist you in your compliance with the applicable disclosure requirements and to enhance the overall disclosure in your filing. We look forward to working with you in these respects. We welcome any questions you may have about our comments or any other aspect of our review. Feel free to call us at the telephone numbers listed at the end of this letter.
Form 10-K/A for the Fiscal Year Ended September 26, 2009
Note 1. Summary of Significant Accounting Policies, Revenue Recognition, page 29
1. We note that in the first quarter of fiscal 2010 you retrospectively adopted accounting standards related to revenue recognition for arrangements with
Peter Oppenheimer Apple Inc. February 18, 2010 Page 2 multiple deliverables and arrangements that include software elements (i.e., ASC 605-25 and 985-605) and you determined the estimated selling price (“ESP”) for unspecified upgrades and features for the iPhone and Apple TV to be $25 and $10, respectively. Please provi de us with further detail behind the considerations you disclosed in determining ESP and confirm it represents your best estimate of the price at which you would transact if the undelivered elements were sold regularly on a stand alone basis. In this regard, please elaborate on the following: • What offerings you considered to be similar to unspecified upgrades and features provided for these produc ts and their respective pricing; • If you considered the pricing of Apple Care for these products; • The nature of your histor ical pricing practices; • How you determined the percentage of E SP in comparison to the total selling price of the product was repres entative of fair value; • Why ESP was established at one rate when multiple versions of the product exist (e.g., iPhone 3G versus 3GS); • How you weighted all of the available information, and; • Any other quantitative or qualitative in formation that had a significant impact on ESP. 2. Additionally, please tell us how you a llocate sales incentives accounted for pursuant to the guidance of ASC 605-50 wh en more than one deliverable is present in an arrangement and how you considered clarifying this in your disclosures. 3. Finally, you indicated in your response letter dated Marc h 13, 2007 to prior comment 3 that you established vendor-spe cific objective evidence (“VSOE”) for undelivered elements in multiple element arrangements, such as APP and .Mac, based upon the price charged on a stand alone basis pursuant to paragraphs 10 and 57 of SOP 97-2. The price charged for undelivered elements when provided on a stand-alone basis fell within a narrow range (typically greater than 90% of stand- alone transactions were within 15% of the median price). Please update us as to if you currently have arrangements with multiple deliverables for products other than the iPhone and Apple TV and tell us how you c onsidered disclosing your policy for them. To the extent you determined such sales were not material, please provide us with the amount of re venue recognized for the arrangements in each period presented.
* * * * * * *
Please respond to these comments within 10 business days or tell us when you will provide us with a response. Please submit all correspondence and supplemental materials on EDGAR as required by Rule 101 of Regulation S-T. If you amend your filing(s), you may wish to provide us with marked copies of any amendment to expedite
Peter Oppenheimer Apple Inc. February 18, 2010 Page 3 our review. Please furnish a cover letter that keys your response to our comments and provides any requested information. Detailed co ver letters greatly faci litate our review. Please understand that we may have addi tional comments after reviewing any amendment and your response to our comments. We urge all persons who are responsible for the accuracy and adequacy of the disclosure in the filing to be certain that the filing includes all in formation required under the Securities Exchange Act of 1934 and th at they have provided all information investors require for an informed invest ment decision. Since the company and its management are in possession of all facts re lating to a company’s disclosure, they are responsible for the accuracy and adequacy of the disclosures they have made. In connection with responding to our comments, please provide, in writing, a statement from the company acknowledging that:
• the company is responsible for the adequacy and accuracy of the disclosure in the filing; • staff comments or changes to disclosure in response to staff comments do not foreclose the Commission from taking any action with respect to the filing; and • the company may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.
In addition, please be advise d that the Division of Enfo rcement has access to all information you provide to the staff of the Divi sion of Corporation Fi nance in our review of your filing or in response to our comments on your filing. You may contact Melissa Fe ider, Staff Accountant, at (202) 551-3379 or me at (202) 551-3499 if you have any questions regarding the above comments. S i n c e r e l y , Kathleen Collins Accounting Branch Chief
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Mail Stop 4561
Via Fax (408) 974-2023
February 18, 2010
Peter Oppenheimer Senior VP and Chief Financial Officer Apple Inc. 1 Infinite Loop Cupertino, CA 95014
Re: Apple Inc.
Form 10-K/A for the Fiscal Year Ended September 26, 2009
Filed on January 25, 2010
File No. 000-10030
Dear Mr. Oppenheimer:
We have reviewed the above-referenced filing and have the following comments.
Please note that we have limited our review to only your financial statements and related
disclosures and do not intend to expand our review to other portions of your document.
If indicated, we think you should revise your document in response to these comments. If you disagree, we will consider your explanation as to why our comment is inapplicable or a revision is unnecessary. Please be as detailed as necessary in your explanation. In some of our comments, we may ask you to provide us with supplemental information so we may better understand your disclosure. After reviewing this information, we may
raise additional comments.
Please understand that the purpose of our re view process is to assist you in your
compliance with the applicable disclosure requirements and to enhance the overall
disclosure in your filing. We look forward to working with you in these respects. We
welcome any questions you may have about our comments or any other aspect of our review. Feel free to call us at the telephone numbers listed at the end of this letter.
Form 10-K/A for the Fiscal Year Ended September 26, 2009
Note 1. Summary of Significant Accounting Policies, Revenue Recognition, page 29
1. We note that in the first quarter of fiscal 2010 you retrospectively adopted
accounting standards related to revenue recognition for arrangements with
Peter Oppenheimer
Apple Inc.
February 18, 2010 Page 2
multiple deliverables and arrangements that include software elements (i.e., ASC 605-25 and 985-605) and you determined the estimated selling price (“ESP”) for
unspecified upgrades and features for the iPhone and Apple TV to be $25 and
$10, respectively. Please provi de us with further detail behind the considerations
you disclosed in determining ESP and confirm it represents your best estimate of the price at which you would transact if the undelivered elements were sold
regularly on a stand alone basis. In this regard, please elaborate on the following:
• What offerings you considered to be similar to unspecified upgrades and
features provided for these produc ts and their respective pricing;
• If you considered the pricing of Apple Care for these products;
• The nature of your histor ical pricing practices;
• How you determined the percentage of E SP in comparison to the total selling
price of the product was repres entative of fair value;
• Why ESP was established at one rate when multiple versions of the product
exist (e.g., iPhone 3G versus 3GS);
• How you weighted all of the available information, and;
• Any other quantitative or qualitative in formation that had a significant impact
on ESP.
2. Additionally, please tell us how you a llocate sales incentives accounted for
pursuant to the guidance of ASC 605-50 wh en more than one deliverable is
present in an arrangement and how you considered clarifying this in your
disclosures.
3. Finally, you indicated in your response letter dated Marc h 13, 2007 to prior
comment 3 that you established vendor-spe cific objective evidence (“VSOE”) for
undelivered elements in multiple element arrangements, such as APP and .Mac,
based upon the price charged on a stand alone basis pursuant to paragraphs 10 and
57 of SOP 97-2. The price charged for undelivered elements when provided on a stand-alone basis fell within a narrow range (typically greater than 90% of stand-
alone transactions were within 15% of the median price). Please update us as to if
you currently have arrangements with multiple deliverables for products other than the iPhone and Apple TV and tell us how you c onsidered disclosing your
policy for them. To the extent you determined such sales were not material, please provide us with the amount of re venue recognized for the arrangements in
each period presented.
* * * * * * *
Please respond to these comments within 10 business days or tell us when you
will provide us with a response. Please submit all correspondence and supplemental
materials on EDGAR as required by Rule 101 of Regulation S-T. If you amend your
filing(s), you may wish to provide us with marked copies of any amendment to expedite
Peter Oppenheimer
Apple Inc. February 18, 2010 Page 3 our review. Please furnish a cover letter that keys your response to our comments and provides any requested information. Detailed co ver letters greatly faci litate our review.
Please understand that we may have addi tional comments after reviewing any
amendment and your response to our comments.
We urge all persons who are responsible for the accuracy and adequacy of the
disclosure in the filing to be certain that the filing includes all in formation required under
the Securities Exchange Act of 1934 and th at they have provided all information
investors require for an informed invest ment decision. Since the company and its
management are in possession of all facts re lating to a company’s disclosure, they are
responsible for the accuracy and adequacy of the disclosures they have made.
In connection with responding to our comments, please provide, in writing, a
statement from the company acknowledging that:
• the company is responsible for the adequacy and accuracy of the disclosure in the
filing;
• staff comments or changes to disclosure in response to staff comments do not
foreclose the Commission from taking any action with respect to the filing; and
• the company may not assert staff comments as a defense in any proceeding initiated
by the Commission or any person under the federal securities laws of the United States.
In addition, please be advise d that the Division of Enfo rcement has access to all
information you provide to the staff of the Divi sion of Corporation Fi nance in our review
of your filing or in response to our comments on your filing.
You may contact Melissa Fe ider, Staff Accountant, at (202) 551-3379 or me at
(202) 551-3499 if you have any questions regarding the above comments.
S i n c e r e l y , Kathleen Collins
Accounting Branch Chief