Apple Inc power point presentation

Davis 8

Antonia Davis

Intermediate Accounting

SEC 10k Summary Report

Apple Inc.

Introduction

A 10k report is hugely a financial statement of a company. This report is unique in that it gives very detailed information about a company's position. It includes details on the company's history, organizational structure, how the shareholders are rewarded, all the company's major changes, deals values and financial statements. It is seen as a combination of all the fiscal documents revolving in an organization at different times around the year.

Major companies that have many shareholders are required to file a copy of the report for the sake of the shareholder's interests. In case of any major changes in the company, the form must be produced to the shareholders. The government makes sure the document is produced and has been circulated to the parties that are involved in the process. This makes it a constitutional requirement for every company.

The essence of the production of the document is to make the parties involved to consider their future with the company. Shareholders can make decisions on their investment with the company. The government is also able to regulate practices of business flow from the trend that is shown by the corporate world.

Apple Inc. is an American multinational company that was created on April 1, 1976, by Steve Jobs and Steve Wozniak (Richardson & Terrell, 2008). The company headquarters is located in Cupertino, California. It is the world's largest information technology company by revenue and total assets. The company produces mobile communication, media devices, personal computers, portable digital music players, accessories. The company also sells software, services, networking solutions, third-party digital content, and applications. The company has various segments and operates worldwide. Its segments include North and South America, Some European, Asian and African countries as well. Apple ranks # 3 on the fortune 500 lists. The company sells its services and products through retail and online stores. It also distributes and sells its products to resellers such as retailers, wholesalers and third-party cellular network carriers. Apple Inc. designs, manufactures, and markets mobile communication and media devices, personal computers, and portable digital music players, and sells a variety of related software, services, peripherals, networking solutions, and third-party digital content and applications. The Company's products and services include iPhone, iPad, Mac, iPod, Apple TV, a portfolio of consumer and professional software applications, the iOS and OS X operating systems, iCloud, and a variety of accessory, service and support offerings. The Company also sells and delivers digital content and applications through the iTunes Store, App Store™, iBooks Store™, and Mac App Store. The Company sells its products worldwide through its retail stores, online stores, and direct sales force, as well as through third-party cellular network carriers, wholesalers, retailers, and value-added resellers.

Trends in Sales Cost Analysis

APPLE INC. 2018-2017 TREND ANALYSIS
(In Millions)	2018	2017	Variance	% Changes
Net Sales	265,595	229,234	36,361	15.86%
Cost of Sales	163,756	141,048	22,708	16.10%
Gross Profit	101,839	88,186	13,653	15.48%
Operating Income	70,898	61,344	9554	15.57%

Apple Company's net operating revenues were $265,595 million, and $229,234 million in 2018, and 2017 respectively. The Company's net operating Revenues increased by $36,361 million, from 2018 to 2017. Apple Company's cost of goods sold was $163,756 million, $ 141,048 in 2018 and 2017 respectively. The company's cost of goods sold has increased tremendously. Apple Company's gross profit was $101,839 million, and $88,186 million in 2018 and 2017, which also shows a profitable increase. As for Apple's operating income, the increases were $70,898 and $61,344.

Apple Inc. reportable segments consist of the "Americas, Europe, Greater China, Japan and Rest of Asia Pacific. Americas includes both North and South America. Europe includes European countries, as well as India, the Middle East and Africa. Greater China includes China, Hong Kong, and Taiwan. The rest of Asia Pacific includes Australia and those Asian countries not included in the Company's other reportable segments." Apple Inc. reports segment material 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 Apple's reportable segments." Apple Inc. assesses the performance of its reportable segments based on net sales and operating income. Other reporting entities include the Financial Accounting Standards Board (FASB). (Apple 2018 SEC 10K)

Liabilities

Apple Company's liabilities for the most recent fiscal year as per the statement of financial position were $258,578 million in 2018 and $241,272 million in 2017. Parent company and the subsidiaries. Currently, based on the financial position statement of Apple Company, there is an increase in the total liabilities of the company. The total obligations incurred in 2018 on the consolidated balance sheet show that the amount had a great amount of increase and is expected to continue to rise in the future.

Contingencies

Apple is involved in various legal proceedings. Outcomes of these legal proceedings are subject to uncertainty and unfavorable outcomes can adversely affect the financial statements. The company considers a liability when a loss has been incurred and the amount can be estimated.

In management's opinion, there is not at least a reasonable possibility the Company may have incurred a material loss, or a material loss over a recorded accrual, concerning loss contingencies, including matters related to the infringement of intellectual property rights. However, the outcome of litigation is inherently uncertain. Moreover, management believes the Company's critical accounting policies and estimates are those related to revenue recognition, valuation and impairment of marketable securities, inventory valuation and valuation of manufacturing-related assets and estimated purchase commitment cancellation fees, warranty costs, income taxes and legal and other contingencies.

The Company has invested, and in the future may invest, in new business strategies or acquisitions. Such endeavors may involve significant risks and uncertainties, including distraction of management from current operations, greater than expected liabilities and expenses, inadequate return of capital and unidentified issues not discovered in the Company's due diligence. These new ventures are inherently risky and may not be successful. Second, the Company could be subject to changes in its tax rates, the adoption of new U.S. or international tax legislation or exposure to additional tax liabilities. As of September 27, 2014, the Company had deferred tax assets arising from deductible temporary differences, tax losses and tax credits of $5.1 billion and deferred tax liabilities of $20.3 billion. During 2014 Apple had liabilities of $7.0 billion. Finally, The Company has not entered into any transactions with unconsolidated entities whereby the Company has financial guarantees, subordinated retained interests, derivative instruments, or other contingent arrangements that expose the Company to material continuing risks, contingent liabilities, or any other obligation under a variable interest in an unconsolidated entity that provides financing, liquidity, market risk, or credit risk support to the Company, or engages in leasing, hedging, or R&D services with the Company

Defining Contingencies

On the stated and other contingencies, the management aims at creating a provision for these litigation-related losses that may upset the financial position and working capital of the company. As such, the management focuses on accounting for these contingent liabilities because they pose reasonable asset impairment threats such as the collectability of receivables and expropriation of assets threats in the case where the resolution is unfavorable to the company (Schiff, Schiff, & Rozen, 2012). These are business risks that need the management's attention. Also, as provided in IAS 37 (Provisions, Contingent Liabilities, and Contingent Assets), the disclosure allows for the application of the recognition criteria and measurement bases for provisions, contingent liabilities and contingent assets that the management should have the best understanding of in terms of their nature, timing and amount.

Stockholders’ Equity

Apple Inc. reported retained earnings of about $70,400 million in the fiscal year Sep. 2018 and $98,330 million in the previous fiscal year Sep. 2017 (Investopedia, 2019). This firm does make adjustments on equity that is comparative to the retaining earnings. Concerning the decrease in the organization's total equity, Apple Inc. Nevertheless, the accumulated deficit or retained earnings in the fiscal year 2016 were even higher as compared to the one recorded in 2018. The retained earnings of 2016 were $96,364 million (Investopedia, 2019). In regards to the compensation and stock options, Apple Inc. compensates its workers through the application of the Restricted Stock Units relying on performance measurements and time on its workers. These shares are only provided on a particular period, thus, it assists in controlling any issues that may arise when workers are also the company's shareholders (Investopedia, 2019). Apple did not issue any option of stock during the fiscal year 2018 to the workers.

Accumulated Other Comprehensive Income / (Loss)

The organization outlined that the outstanding balance on the stock option would be rendered worthless in Sep. 2030 (Inventopedia, 2019). This action indicates that the firm has stopped giving out stock options and stock compensation recently to their workers. In Sep. 2018, Apple Inc. reported accumulated other comprehensive income of $3,026 million (Inventopedia, 2019). Besides, this comprehensive loss was even lower and the company recorded $784 million in Sep. 2017 fiscal year (Inventopedia, 2019). Apple organization also disclosed that this loss was slightly higher in Sep. 2016. The 2016's amount was $979 million. This current accumulative loss was primarily from foreign currency exchange from other subsidiaries (Inventopedia, 2019). On the contrary, for 2017, the loss was incurred from post-retirement benefits and pension similar to 2016 (Inventopedia, 2019).

Investments

The policy of the company is to invest in research and development and also the marketing and advertising of the products in an innovative way. The investments made in the sectors which can enhance sales of the reseller. The retail stores of the Company also invested in equipment improvements, information systems, inventory, etc. The investment in the new business strategies can also make some risks and uncertainties to the company. The investment portfolio of the company affects inversely because it depends on the future value or fluctuations, so maybe there is no exact loss of cash or cash equivalents but can make a negative effect on the financial condition of the company. In September 2017, $ 242 was invested in the stock which includes the reinvestment of dividends and in the year 2018 in the invested amount increase to the $359. As the strategy to invest in the R&D sector, the expenses in this sector also increase from $26,842 in 2017 26,842 to $30941 in the year 2018. The fair value of marketable securities in 2018 was $186,837 with unrealized losses $4,289 and in 2017 was $110,276 with unrealized losses $782. The company invested in securities that are highly rated and with minimum loss.

Revenue Recognition

The sales of hardware, software, applications, etc. generate revenue. The revenue recognized by the company after the collection of evidence of an arrangement, delivery to the customer, getting the sales price. The revenue collected from the contract with customers. For online sales, the company will receive the revenue after the receiving of the product by the customer because the Company retains a risk of loss on sales during transit. For the payment terms, the revenue is recognized as due till the collection of evidence that the sales price is fixed. ("Document," 2017) It also gets revenues. From industry-specific software accounting guidance for the selling of the software products, upgrades, software bundled with hardware. The selling price is used to determine the revenue to the deliverables. The deliverables have gathered the evidence of vendor-specific, third party and the estimate of the selling price. The deferred revenue is calculated based on the advance payments and this depends on the sale of the gift cards and redemption of the card by the custom

Capital expenditures

· Apple's latest twelve months capital expenditures is 10.495 billion.

· Apple's capital expenditures hit its four-year low in September 2019 of 10.495 billion.

· Looking back at the last four years, Apple's capital expenditures peaked in September 2018 at 13.313 billion.

· Apple's operated at median capital expenditures of 12.451 billion from fiscal years ending September 2015 to 2019.

· Apple's capital expenditures for fiscal years ending September 2015 to 2019 averaged 12.048 billion.

· Apple's capital expenditures decreased in 2017 (12.451 billion, -2.2%) and 2019 (10.495 billion, -21.2%) and increased in 2018 (13.313 billion, +6.9%). (“The Complete Toolbox for Investors | finbox.com,” 2019b)

Statement of Cash flows

 Cash flow can be made in a couple of ways. They are the best way as well as the complicated way. The cash flow of financing activities, as well as cash flow from investment, are measured in an identical manner following both the rules, although the cash flow from the working activities section is distinct in those two schemes. The operating sector of cash flow working by utilizing direct approach combines cash flow from suppliers, as well as cash flow from consumers whereas the second method begins with net income plus thereafter agreements, are presented to estimate cash from performing activities (Heracleous & Papachroni, 2016). A settlement of cash produced by operating activities plus net income is needed an indirect & complicated method yet it is done automatically in an indirect way. Apple, Inc. practices the indirect method to serve its consolidated reports of cash flows.

The practice of creating net cash produced by operating activities that Apple Inc. utilizes is the indirect manner in which Apple Inc.'s remaining assets have occurred adjusted for non-cash charges as well as improvements & decreases in operating assets as well as liabilities in the modern status of the balance sheet. In cash consideration of cash from working activities net profit is improved by combining non-cash expenses, operating disadvantages then decreasing non-operating gains, adding a reduction in modern assets, diminishing increase in present assets, combining an increase in modern responsibilities, decreasing reduction in contemporary responsibilities, as well as these adjustments, produce net cash flow from working activities. This is the system that Apple Inc. has utilized in calculating net cash flow from conducting movements on its receipt of cash flows.

Investing and Financing Activities

Here we are discussing the differences in preparing the Statement of Cash Flows using International Financial Reporting Standards (IFRS). IFRS support both the straight method as well as the secondary method for making cash flows. Although none of them makes it mandatory. IFRS provides the opportunity for things to communicate business also dividend paid as working or supporting movements while the US GAAP provides a clear guidance about the method, it should be disclosed (Lockamy, 2017). In IFRS, the Bank overdrafts are interpreted as using as well as disclosed in investment motions while US GAAP handles it as short-term renting. IFRS needs separate exposure for demands paid while US GAAP expects it to be revealed in conducting cash flows. US GAAP prevents the declaration of cash flow per share although the IFRS does not have a prescription. US GAAP demands complete revelation while IFRS needs basic declaration (Yusoff & Husnina, 2018).

There are three types of investment in the cash flow statement such as Marketable Securities Investment, Equity method Investment & Property plant & Equipment Investment. Marketable Securities Investment remains for the outside sales of the organization, Equity method Investments are non-current investments. These contain an important influence on the outside business of the organization. Last but not least, the Property Plant & Equipment investments are the kinds of business investments made within the business for the expansion or growth of the business. Apple also has a massive cash flow that continues to accumulate, which adds value to the company's stock. Apple is a company known for its technological innovation. In 2016, the company spent around 10.39 billion dollars on research and development.

Conclusion

I have successfully analyzed Apple Company and dug into its core business, just by evaluating the 10k document. This document is a superb tool for evaluating a company and knowing if it's a good place in which to invest your money. For any investor who wants detailed and brief information on a company, the 10k should be what they should look for. It summarizes everything about a company; hence it's a very valuable tool.

Reference

Schiff, J., Schiff, A., & Rozen, H. (2012). Accounting for Contingencies: Disclosure of Future Business Risks. Management Accounting. Retrieved from https://www.imanet.org/-/media/8654f03aa1034508ad919cb0c56f4871.ashx

Investopedia. (2019). How to read apple's balance sheet. Inventopedia. Retrieved from https://www.investopedia.com/stock-analysis/021015/understanding-apples-balance-sheet-appl.aspx

Washington, D. UNITED STATES SECURITIES AND EXCHANGE COMMISSION ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 One Apple Park Way Cupertino, California 95014 (Address of Principal Executive Offices) (Zip Code). 2018.

“The Complete Toolbox for Investors | Finbox.Com.” Finbox.Com, 2019, finbox.com/AAPL/explorer/capex.

Heracleous, L., & Papachroni, A. (2016). Strategic Leadership and Innovation at Apple Inc. SAGE Publications Ltd.

Lockamy III, A. (2017, July). An examination of external risk factors in Apple Inc.’s supply chain. In Supply Chain Forum: An International Journal (Vol. 18, No. 3, pp. 177-188). Taylor & Francis.

Yusoff, M., & Husnina, N. (2018). Determinants of Risks and Performance in Apple Inc. Available at SSRN 3181705.

https://www.sec.gov/Archives/edgar/data/320193/000032019318000145/a10-k20189292018.htm