AAPL Financial Risks

The Company’s profit margins vary across its products, services, geographic segments and distribution channels. For example, the gross margins on the Company’s products and services vary significantly and can change over time. The Company’s gross margins are subject to volatility and downward pressure due to a variety of factors, including: continued industry-wide global product pricing pressures and product pricing actions that the Company may take in response to such pressures; increased competition; the Company’s ability to effectively stimulate demand for certain of its products and services; compressed product life cycles; supply shortages; potential increases in the cost of components, outside manufacturing services, and developing, acquiring and delivering content for the Company’s services; the Company’s ability to manage product quality and warranty costs effectively; shifts in the mix of products and services, or in the geographic, currency or channel mix, including to the extent that regulatory changes require the Company to modify its product and service offerings; fluctuations in foreign exchange rates; inflation and other macroeconomic pressures; and the introduction of new products or services, including new products or services with higher cost structures. These and other factors could have a materially adverse impact on the Company’s results of operations and financial condition.


AAPL Financial Risks

The Company has historically experienced higher net sales in its first quarter compared to other quarters in its fiscal year due in part to seasonal holiday demand. Additionally, new product and service introductions can significantly impact net sales, cost of sales and operating expenses. Further, the Company generates a significant portion of its net sales from a single product and a decline in demand for that product could significantly impact quarterly net sales. The Company could also be subject to unexpected developments, such as lower-than-anticipated demand for the Company’s products or services, issues with new product or service introductions, information technology system failures or network disruptions, or failure of one of the Company’s logistics, components supply, or manufacturing partners.


AAPL Financial Risks

The Company’s financial performance is subject to risks associated with changes in the value of the U.S. dollar relative to local currencies.


AAPL Financial Risks

The Company’s primary exposure to movements in foreign exchange rates relates to non–U.S. dollar–denominated sales, cost of sales and operating expenses worldwide. Gross margins on the Company’s products in foreign countries and on products that include components obtained from foreign suppliers have in the past been adversely affected and could in the future be materially adversely affected by foreign exchange rate fluctuations.


AAPL Financial Risks

The weakening of foreign currencies relative to the U.S. dollar adversely affects the U.S. dollar value of the Company’s foreign currency–denominated sales and earnings, and generally leads the Company to raise international pricing, potentially reducing demand for the Company’s products. In some circumstances, for competitive or other reasons, the Company may decide not to raise international pricing to offset the U.S. dollar’s strengthening, which would adversely affect the U.S. dollar value of the gross margins the Company earns on foreign currency–denominated sales.


AAPL Financial Risks

Conversely, a strengthening of foreign currencies relative to the U.S. dollar, while generally beneficial to the Company’s foreign currency–denominated sales and earnings, could cause the Company to reduce international pricing or incur losses on its foreign currency derivative instruments, thereby limiting the benefit. Additionally, strengthening of foreign currencies may increase the Company’s cost of product components denominated in those currencies, thus adversely affecting gross margins.


AAPL Financial Risks

The Company uses derivative instruments, such as foreign currency forward and option contracts, to hedge certain exposures to fluctuations in foreign exchange rates. The use of such hedging activities may not be effective to offset any, or more than a portion, of the adverse financial effects of unfavorable movements in foreign exchange rates over the limited time the hedges are in place.


AAPL Financial Risks

The Company is exposed to credit risk and fluctuations in the values of its investment portfolio.


AAPL Financial Risks

The Company’s investments can be negatively affected by changes in liquidity, credit deterioration, financial results, market and economic conditions, political risk, sovereign risk, interest rate fluctuations or other factors. As a result, the value and liquidity of the Company’s cash, cash equivalents and marketable securities may fluctuate substantially. Therefore, although the Company has not realized any significant losses on its cash, cash equivalents and marketable securities, future fluctuations in their value could result in significant losses and could have a material adverse impact on the Company’s results of operations and financial condition.


AAPL Apple Inc. | 2023 Form 10-K | 15

The Company is exposed to credit risk on its trade accounts receivable, vendor non-trade receivables and prepayments related to long-term supply agreements, and this risk is heightened during periods when economic conditions worsen.


AAPL Apple Inc. | 2023 Form 10-K | 15

The Company distributes its products and certain of its services through third-party cellular network carriers, wholesalers, retailers and resellers. The Company also sells its products and services directly to small and mid-sized businesses and education, enterprise and government customers. A substantial majority of the Company’s outstanding trade receivables are not covered by collateral, third-party bank support or financing arrangements, or credit insurance, and a significant portion of the Company’s trade receivables can be concentrated within cellular network carriers or other resellers. The Company’s exposure to credit and collectibility risk on its trade receivables is higher in certain international markets and its ability to mitigate such risks may be limited. The Company also has unsecured vendor non-trade receivables resulting from purchases of components by outsourcing partners and other vendors that manufacture subassemblies or assemble final products for the Company. In addition, the Company has made prepayments associated with long-term supply agreements to secure supply of inventory components. As of September 30, 2023, the Company’s vendor non-trade receivables and prepayments related to long-term supply agreements were concentrated among a few individual vendors located primarily in Asia. While the Company has procedures to monitor and limit exposure to credit risk on its trade and vendor non-trade receivables, as well as long-term prepayments, there can be no assurance such procedures will effectively limit its credit risk and avoid losses.


AAPL Apple Inc. | 2023 Form 10-K | 15

The Company is subject to changes in tax rates, the adoption of new U.S. or international tax legislation and exposure to additional tax liabilities.


AAPL Apple Inc. | 2023 Form 10-K | 15

The Company is subject to taxes in the U.S. and numerous foreign jurisdictions, including Ireland and Singapore, where a number of the Company’s subsidiaries are organized. Due to economic and political conditions, tax laws and tax rates for income taxes and other non-income taxes in various jurisdictions may be subject to significant change. For example, the Organisation for Economic Co-operation and Development continues to advance proposals for modernizing international tax rules, including the introduction of global minimum tax standards. The Company’s effective tax rates are affected by changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities, the introduction of new taxes, and changes in tax laws or their interpretation. The application of tax laws may be uncertain, require significant judgment and be subject to differing interpretations.


AAPL Apple Inc. | 2023 Form 10-K | 15

The Company is also subject to the examination of its tax returns and other tax matters by the U.S. Internal Revenue Service and other tax authorities and governmental bodies. The Company regularly assesses the likelihood of an adverse outcome resulting from these examinations to determine the adequacy of its provision for taxes. There can be no assurance as to the outcome of these examinations. If the Company’s effective tax rates were to increase, or if the ultimate determination of the Company’s taxes owed is for an amount in excess of amounts previously accrued, the Company’s business, results of operations and financial condition could be materially adversely affected.


AAPL General Risks

The price of the Company’s stock is subject to volatility.


AAPL General Risks

The Company’s stock has experienced substantial price volatility in the past and may continue to do so in the future. Additionally, the Company, the technology industry and the stock market as a whole have, from time to time, experienced extreme stock price and volume fluctuations that have affected stock prices in ways that may have been unrelated to these companies’ operating performance. Price volatility may cause the average price at which the Company repurchases its stock in a given period to exceed the stock’s price at a given point in time. The Company believes the price of its stock should reflect expectations of future growth and profitability. The Company also believes the price of its stock should reflect expectations that its cash dividend will continue at current levels or grow, and that its current share repurchase program will be fully consummated. Future dividends are subject to declaration by the Company’s Board of Directors, and the Company’s share repurchase program does not obligate it to acquire any specific number of shares. If the Company fails to meet expectations related to future growth, profitability, dividends, share repurchases or other market expectations, the price of the Company’s stock may decline significantly, which could have a material adverse impact on investor confidence and employee retention.


AAPL Unresolved Staff Comments

None.


AAPL Cybersecurity

Not applicable.


AAPL Properties

The Company’s headquarters is located in Cupertino, California. As of September 30, 2023, the Company owned or leased facilities and land for corporate functions, R&D, data centers, retail and other purposes at locations throughout the U.S. and in various places outside the U.S. The Company believes its existing facilities and equipment, which are used by all reportable segments, are in good operating condition and are suitable for the conduct of its business.


AAPL Epic Games

Epic Games, Inc. (“Epic”) filed a lawsuit in the U.S. District Court for the Northern District of California (the “District Court”) against the Company alleging violations of federal and state antitrust laws and California’s unfair competition law based upon the Company’s operation of its App Store. On September 10, 2021, the District Court ruled in favor of the Company with respect to nine out of the ten counts included in Epic’s claim. The District Court found that certain provisions of the Company’s App Store Review Guidelines violate California’s unfair competition law and issued an injunction enjoining the Company from prohibiting developers from including in their apps external links that direct customers to purchasing mechanisms other than Apple in-app purchasing. The injunction applies to apps on the U.S. storefront of the iOS and iPadOS App Store. On April 24, 2023, the U.S. Court of Appeals for the Ninth Circuit (the “Circuit Court”) affirmed the District Court’s ruling. On June 7, 2023, the Company and Epic filed petitions with the Circuit Court requesting further review of the decision. On June 30, 2023, the Circuit Court denied both petitions. On July 17, 2023, the Circuit Court granted Apple’s motion to stay enforcement of the injunction pending appeal to the U.S. Supreme Court. If the U.S. Supreme Court denies Apple’s petition, the stay of the injunction will expire.


AAPL Masimo

Masimo Corporation and Cercacor Laboratories, Inc. (together, “Masimo”) filed a complaint before the U.S. International Trade Commission (the “ITC”) alleging infringement by the Company of five patents relating to the functionality of the blood oxygen feature in Apple Watch Series 6 and 7. In its complaint, Masimo sought a permanent exclusion order prohibiting importation to the United States of certain Apple Watch models that include blood oxygen sensing functionality. On October 26, 2023, the ITC entered a limited exclusion order (the “Order”) prohibiting importation and sales in the United States of Apple Watch models with blood oxygen sensing functionality, which includes Apple Watch Series 9 and Ultra 2. The Order will not go into effect until the end of the administrative review period, which is currently expected to end on December 25, 2023. The Company intends to appeal the Order and seek a stay pending the appeal.


AAPL Other Legal Proceedings

The Company is subject to other legal proceedings and claims that have not been fully resolved and that have arisen in the ordinary course of business. The Company settled certain matters during the fourth quarter of 2023 that did not individually or in the aggregate have a material impact on the Company’s financial condition or operating results. The outcome of litigation is inherently uncertain. If one or more legal matters were resolved against the Company in a reporting period for amounts above management’s expectations, the Company’s financial condition and operating results for that reporting period could be materially adversely affected.


AAPL Mine Safety Disclosures

Not applicable.


AAPL Apple Inc. | 2023 Form 10-K | 17

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities


AAPL Apple Inc. | 2023 Form 10-K | 17

The Company’s common stock is traded on The Nasdaq Stock Market LLC under the symbol AAPL.


AAPL Holders

As of October 20, 2023, there were 23,763 shareholders of record.


AAPL Purchases of Equity Securities by the Issuer and Affiliated Purchasers

Share repurchase activity during the three months ended September 30, 2023 was as follows (in millions, except number of shares, which are reflected in thousands, and per-share amounts): Periods##Total Number of Shares Purchased######Average Price Paid Per Share##Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs######Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (1) July 2, 2023 to August 5, 2023:################ Open market and privately negotiated purchases##33,864####$##191.62##33,864###### August 6, 2023 to September 2, 2023:################ August 2023 ASRs##22,085##(2)####(2)##22,085##(2)#### Open market and privately negotiated purchases##30,299####$##178.99##30,299###### September 3, 2023 to September 30, 2023:################ Open market and privately negotiated purchases##20,347####$##176.31##20,347###### Total##106,595############$##74,069


(1)As of September 30, 2023, the Company was authorized by the Board of Directors to purchase up to $90 billion of the Company’s common stock under a share repurchase program announced on May 4, 2023, of which $15.9 billion had been utilized. During the fourth quarter of 2023, the Company also utilized the final $4.6 billion under its previous repurchase program, which was most recently authorized in April 2022. The programs do not obligate the Company to acquire a minimum amount of shares. Under the programs, shares may be repurchased in privately negotiated or open market transactions, including under plans complying with Rule 10b5-1 under the Exchange Act.


(2)In August 2023, the Company entered into new accelerated share repurchase agreements (“ASRs”). Under the terms of the ASRs, two financial institutions committed to deliver shares of the Company’s common stock during the purchase periods in exchange for up-front payments totaling $5.0 billion. The total number of shares ultimately delivered under the ASRs, and therefore the average repurchase price paid per share, is determined based on the volume-weighted average price of the Company’s common stock during the ASRs’ purchase periods, which end in the first quarter of 2024.


AAPL Company Stock Performance

The following graph shows a comparison of five-year cumulative total shareholder return, calculated on a dividend-reinvested basis, for the Company, the S&P 500 Index and the Dow Jones U.S. Technology Supersector Index. The graph assumes $100 was invested in each of the Company’s common stock, the S&P 500 Index and the Dow Jones U.S. Technology Supersector Index as of the market close on September 28, 2018. Past stock price performance is not necessarily indicative of future stock price performance. ####September 2018####September 2019####September 2020####September 2021####September 2022####September 2023 Apple Inc.##$##100##$##98##$##204##$##269##$##277##$##317 S&P 500 Index##$##100##$##104##$##118##$##161##$##136##$##160 Dow Jones U.S. Technology Supersector Index##$##100##$##105##$##154##$##227##$##164##$##226


AAPL Apple Inc. | 2023 Form 10-K | 19

Management’s Discussion and Analysis of Financial Condition and Results of Operations


AAPL Apple Inc. | 2023 Form 10-K | 19

The following discussion should be read in conjunction with the consolidated financial statements and accompanying notes included in Part II, Item 8 of this Form 10-K. This Item generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022. Discussions of 2021 items and year-to-year comparisons between 2022 and 2021 are not included, and can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended September 24, 2022.


AAPL Fiscal Period

The Company’s fiscal year is the 52- or 53-week period that ends on the last Saturday of September. An additional week is included in the first fiscal quarter every five or six years to realign the Company’s fiscal quarters with calendar quarters, which occurred in the first quarter of 2023. The Company’s fiscal year 2023 spanned 53 weeks, whereas fiscal years 2022 and 2021 spanned 52 weeks each.


AAPL Fiscal Year Highlights

The Company’s total net sales were $383.3 billion and net income was $97.0 billion during 2023.


AAPL Fiscal Year Highlights

The Company’s total net sales decreased 3% or $11.0 billion during 2023 compared to 2022. The weakness in foreign currencies relative to the U.S. dollar accounted for more than the entire year-over-year decrease in total net sales, which consisted primarily of lower net sales of Mac and iPhone, partially offset by higher net sales of Services.


AAPL Fiscal Year Highlights

The Company announces new product, service and software offerings at various times during the year. Significant announcements during fiscal year 2023 included the following:


AAPL Fiscal Year Highlights

First Quarter 2023: •iPad and iPad Pro; •Next-generation Apple TV 4K; and •MLS Season Pass, a Major League Soccer subscription streaming service.


AAPL Fiscal Year Highlights

Second Quarter 2023: •MacBook Pro 14”, MacBook Pro 16” and Mac mini; and •Second-generation HomePod.


AAPL Fiscal Year Highlights

Third Quarter 2023: •MacBook Air 15”, Mac Studio and Mac Pro; •Apple Vision ProTM, the Company’s first spatial computer featuring its new visionOSTM, expected to be available in early calendar year 2024; and •iOS 17, macOS Sonoma, iPadOS 17, tvOS 17 and watchOS 10, updates to the Company’s operating systems.


AAPL Fiscal Year Highlights

Fourth Quarter 2023: •iPhone 15, iPhone 15 Plus, iPhone 15 Pro and iPhone 15 Pro Max; and •Apple Watch Series 9 and Apple Watch Ultra 2.


AAPL Fiscal Year Highlights

In May 2023, the Company announced a new share repurchase program of up to $90 billion and raised its quarterly dividend from $0.23 to $0.24 per share beginning in May 2023. During 2023, the Company repurchased $76.6 billion of its common stock and paid dividends and dividend equivalents of $15.0 billion.


AAPL Macroeconomic Conditions

Macroeconomic conditions, including inflation, changes in interest rates, and currency fluctuations, have directly and indirectly impacted, and could in the future materially impact, the Company’s results of operations and financial condition.


AAPL Segment Operating Performance

The following table shows net sales by reportable segment for 2023, 2022 and 2021 (dollars in millions): ####2023##Change######2022##Change######2021 Net sales by reportable segment:#################### Americas##$##162,560##(4)##%##$##169,658##11##%##$##153,306 Europe####94,294##(1)##%####95,118##7##%####89,307 Greater China####72,559##(2)##%####74,200##9##%####68,366 Japan####24,257##(7)##%####25,977##(9)##%####28,482 Rest of Asia Pacific####29,615##1##%####29,375##11##%####26,356 Total net sales##$##383,285##(3)##%##$##394,328##8##%##$##365,817


AAPL Americas

Americas net sales decreased 4% or $7.1 billion during 2023 compared to 2022 due to lower net sales of iPhone and Mac, partially offset by higher net sales of Services.


AAPL Europe

Europe net sales decreased 1% or $824 million during 2023 compared to 2022. The weakness in foreign currencies relative to the U.S. dollar accounted for more than the entire year-over-year decrease in Europe net sales, which consisted primarily of lower net sales of Mac and Wearables, Home and Accessories, partially offset by higher net sales of iPhone and Services.


AAPL Greater China

Greater China net sales decreased 2% or $1.6 billion during 2023 compared to 2022. The weakness in the renminbi relative to the U.S. dollar accounted for more than the entire year-over-year decrease in Greater China net sales, which consisted primarily of lower net sales of Mac and iPhone.


AAPL Japan

Japan net sales decreased 7% or $1.7 billion during 2023 compared to 2022. The weakness in the yen relative to the U.S. dollar accounted for more than the entire year-over-year decrease in Japan net sales, which consisted primarily of lower net sales of iPhone, Wearables, Home and Accessories and Mac.


AAPL Rest of Asia Pacific

Rest of Asia Pacific net sales increased 1% or $240 million during 2023 compared to 2022. The weakness in foreign currencies relative to the U.S. dollar had a significantly unfavorable year-over-year impact on Rest of Asia Pacific net sales. The net sales increase consisted of higher net sales of iPhone and Services, partially offset by lower net sales of Mac and iPad.


AAPL Products and Services Performance

The following table shows net sales by category for 2023, 2022 and 2021 (dollars in millions): ####2023##Change######2022##Change######2021 Net sales by category:#################### iPhone (1)##$##200,583##(2)##%##$##205,489##7##%##$##191,973 Mac (1)####29,357##(27)##%####40,177##14##%####35,190 iPad (1)####28,300##(3)##%####29,292##(8)##%####31,862 Wearables, Home and Accessories (1)####39,845##(3)##%####41,241##7##%####38,367 Services (2)####85,200##9##%####78,129##14##%####68,425 Total net sales##$##383,285##(3)##%##$##394,328##8##%##$##365,817


AAPL Products and Services Performance

(1)Products net sales include amortization of the deferred value of unspecified software upgrade rights, which are bundled in the sales price of the respective product.


AAPL Products and Services Performance

(2)Services net sales include amortization of the deferred value of services bundled in the sales price of certain products.


AAPL iPhone

iPhone net sales decreased 2% or $4.9 billion during 2023 compared to 2022 due to lower net sales of non-Pro iPhone models, partially offset by higher net sales of Pro iPhone models.


AAPL Mac

Mac net sales decreased 27% or $10.8 billion during 2023 compared to 2022 due primarily to lower net sales of laptops.


AAPL iPad

iPad net sales decreased 3% or $1.0 billion during 2023 compared to 2022 due primarily to lower net sales of iPad mini and iPad Air, partially offset by the combined net sales of iPad 9th and 10th generation.


AAPL Wearables, Home and Accessories

Wearables, Home and Accessories net sales decreased 3% or $1.4 billion during 2023 compared to 2022 due primarily to lower net sales of Wearables and Accessories.


AAPL Services

Services net sales increased 9% or $7.1 billion during 2023 compared to 2022 due to higher net sales across all lines of business.


AAPL Gross Margin

Products and Services gross margin and gross margin percentage for 2023, 2022 and 2021 were as follows (dollars in millions): ####2023####2022####2021 Gross margin:############ Products##$##108,803##$##114,728##$##105,126 Services####60,345####56,054####47,710 Total gross margin##$##169,148##$##170,782##$##152,836 Gross margin percentage:############ Products##36.5##%##36.3##%##35.3##% Services##70.8##%##71.7##%##69.7##% Total gross margin percentage##44.1##%##43.3##%##41.8##%


AAPL Products Gross Margin

Products gross margin decreased during 2023 compared to 2022 due to the weakness in foreign currencies relative to the U.S. dollar and lower Products volume, partially offset by cost savings and a different Products mix.


AAPL Products Gross Margin

Products gross margin percentage increased during 2023 compared to 2022 due to cost savings and a different Products mix, partially offset by the weakness in foreign currencies relative to the U.S. dollar and decreased leverage.


AAPL Services Gross Margin

Services gross margin increased during 2023 compared to 2022 due primarily to higher Services net sales, partially offset by the weakness in foreign currencies relative to the U.S. dollar and higher Services costs.


AAPL Services Gross Margin

Services gross margin percentage decreased during 2023 compared to 2022 due to higher Services costs and the weakness in foreign currencies relative to the U.S. dollar, partially offset by a different Services mix.


AAPL Services Gross Margin

The Company’s future gross margins can be impacted by a variety of factors, as discussed in Part I, Item 1A of this Form 10-K under the heading “Risk Factors.” As a result, the Company believes, in general, gross margins will be subject to volatility and downward pressure.


AAPL Operating Expenses

Operating expenses for 2023, 2022 and 2021 were as follows (dollars in millions): ####2023####Change######2022####Change######2021## Research and development##$##29,915####14##%##$##26,251####20##%##$##21,914## Percentage of total net sales####8##%########7##%########6##% Selling, general and administrative##$##24,932####(1)##%##$##25,094####14##%##$##21,973## Percentage of total net sales####7##%########6##%########6##% Total operating expenses##$##54,847####7##%##$##51,345####17##%##$##43,887## Percentage of total net sales####14##%########13##%########12##%


AAPL Research and Development

The year-over-year growth in R&D expense in 2023 was driven primarily by increases in headcount-related expenses.


AAPL Selling, General and Administrative

Selling, general and administrative expense was relatively flat in 2023 compared to 2022.


AAPL Provision for Income Taxes

Provision for income taxes, effective tax rate and statutory federal income tax rate for 2023, 2022 and 2021 were as follows (dollars in millions): ####2023######2022######2021## Provision for income taxes##$##16,741####$##19,300####$##14,527## Effective tax rate####14.7##%####16.2##%####13.3##% Statutory federal income tax rate####21##%####21##%####21##%


AAPL Provision for Income Taxes

The Company’s effective tax rate for 2023 and 2022 was lower than the statutory federal income tax rate due primarily to a lower effective tax rate on foreign earnings, the impact of the U.S. federal R&D credit, and tax benefits from share-based compensation, partially offset by state income taxes.


AAPL Provision for Income Taxes

The Company’s effective tax rate for 2023 was lower compared to 2022 due primarily to a lower effective tax rate on foreign earnings and the impact of U.S. foreign tax credit regulations issued by the U.S. Department of the Treasury in 2022, partially offset by lower tax benefits from share-based compensation.


AAPL Liquidity and Capital Resources

The Company believes its balances of cash, cash equivalents and unrestricted marketable securities, which totaled $148.3 billion as of September 30, 2023, along with cash generated by ongoing operations and continued access to debt markets, will be sufficient to satisfy its cash requirements and capital return program over the next 12 months and beyond.


AAPL Liquidity and Capital Resources

The Company’s material cash requirements include the following contractual obligations: Debt


AAPL Liquidity and Capital Resources

As of September 30, 2023, the Company had outstanding fixed-rate notes with varying maturities for an aggregate principal amount of $106.6 billion (collectively the “Notes”), with $9.9 billion payable within 12 months. Future interest payments associated with the Notes total $41.1 billion, with $2.9 billion payable within 12 months.


AAPL Liquidity and Capital Resources

The Company also issues unsecured short-term promissory notes pursuant to a commercial paper program. As of September 30, 2023, the Company had $6.0 billion of commercial paper outstanding, all of which was payable within 12 months.


AAPL Leases

The Company has lease arrangements for certain equipment and facilities, including corporate, data center, manufacturing and retail space. As of September 30, 2023, the Company had fixed lease payment obligations of $15.8 billion, with $2.0 billion payable within 12 months.


AAPL Manufacturing Purchase Obligations

The Company utilizes several outsourcing partners to manufacture subassemblies for the Company’s products and to perform final assembly and testing of finished products. The Company also obtains individual components for its products from a wide variety of individual suppliers. As of September 30, 2023, the Company had manufacturing purchase obligations of $53.1 billion, with $52.9 billion payable within 12 months. The Company’s manufacturing purchase obligations are primarily noncancelable.


AAPL Other Purchase Obligations

The Company’s other purchase obligations primarily consist of noncancelable obligations to acquire capital assets, including assets related to product manufacturing, and noncancelable obligations related to supplier arrangements, licensed intellectual property and content, and distribution rights. As of September 30, 2023, the Company had other purchase obligations of $21.9 billion, with $5.6 billion payable within 12 months.


AAPL Deemed Repatriation Tax Payable

As of September 30, 2023, the balance of the deemed repatriation tax payable imposed by the U.S. Tax Cuts and Jobs Act of 2017 (the “Act”) was $22.0 billion, with $6.5 billion expected to be paid within 12 months.


AAPL Capital Return Program

In addition to its contractual cash requirements, the Company has an authorized share repurchase program. The program does not obligate the Company to acquire a minimum amount of shares. As of September 30, 2023, the Company’s quarterly cash dividend was $0.24 per share. The Company intends to increase its dividend on an annual basis, subject to declaration by the Board of Directors.


AAPL Critical Accounting Estimates

The preparation of financial statements and related disclosures in conformity with U.S. generally accepted accounting principles (“GAAP”) and the Company’s discussion and analysis of its financial condition and operating results require the Company’s management to make judgments, assumptions and estimates that affect the amounts reported. Note 1, “Summary of Significant Accounting Policies” of the Notes to Consolidated Financial Statements in Part II, Item 8 of this Form 10-K describes the significant accounting policies and methods used in the preparation of the Company’s consolidated financial statements. Management bases its estimates on historical experience and on various other assumptions it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities.


AAPL Uncertain Tax Positions

The Company is subject to income taxes in the U.S. and numerous foreign jurisdictions. The evaluation of the Company’s uncertain tax positions involves significant judgment in the interpretation and application of GAAP and complex domestic and international tax laws, including the Act and matters related to the allocation of international taxation rights between countries. Although management believes the Company’s reserves are reasonable, no assurance can be given that the final outcome of these uncertainties will not be different from that which is reflected in the Company’s reserves. Reserves are adjusted considering changing facts and circumstances, such as the closing of a tax examination. Resolution of these uncertainties in a manner inconsistent with management’s expectations could have a material impact on the Company’s financial condition and operating results.


AAPL Legal and Other Contingencies

The Company is subject to various legal proceedings and claims that arise in the ordinary course of business, the outcomes of which are inherently uncertain. The Company records a liability when it is probable that a loss has been incurred and the amount is reasonably estimable, the determination of which requires significant judgment. Resolution of legal matters in a manner inconsistent with management’s expectations could have a material impact on the Company’s financial condition and operating results.


AAPL Quantitative and Qualitative Disclosures About Market Risk

The Company is exposed to economic risk from interest rates and foreign exchange rates. The Company uses various strategies to manage these risks; however, they may still impact the Company’s consolidated financial statements.


AAPL Interest Rate Risk

The Company is primarily exposed to fluctuations in U.S. interest rates and their impact on the Company’s investment portfolio and term debt. Increases in interest rates will negatively affect the fair value of the Company’s investment portfolio and increase the interest expense on the Company’s term debt. To protect against interest rate risk, the Company may use derivative instruments, offset interest rate–sensitive assets and liabilities, or control duration of the investment and term debt portfolios.


AAPL Interest Rate Risk

The following table sets forth potential impacts on the Company’s investment portfolio and term debt, including the effects of any associated derivatives, that would result from a hypothetical increase in relevant interest rates as of September 30, 2023 and September 24, 2022 (dollars in millions): Interest Rate Sensitive Instrument##Hypothetical Interest Rate Increase##Potential Impact####2023####2022 Investment portfolio##100 basis points, all tenors##Decline in fair value##$##3,089##$##4,022 Term debt##100 basis points, all tenors##Increase in annual interest expense##$##194##$##201


AAPL Foreign Exchange Rate Risk

The Company’s exposure to foreign exchange rate risk relates primarily to the Company being a net receiver of currencies other than the U.S. dollar. Changes in exchange rates, and in particular a strengthening of the U.S. dollar, will negatively affect the Company’s net sales and gross margins as expressed in U.S. dollars. Fluctuations in exchange rates may also affect the fair values of certain of the Company’s assets and liabilities. To protect against foreign exchange rate risk, the Company may use derivative instruments, offset exposures, or adjust local currency pricing of its products and services. However, the Company may choose to not hedge certain foreign currency exposures for a variety of reasons, including accounting considerations or prohibitive cost.


AAPL Foreign Exchange Rate Risk

The Company applied a value-at-risk (“VAR”) model to its foreign currency derivative positions to assess the potential impact of fluctuations in exchange rates. The VAR model used a Monte Carlo simulation. 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. Based on the results of the model, the Company estimates, with 95% confidence, a maximum one-day loss in fair value of $669 million and $1.0 billion as of September 30, 2023 and September 24, 2022, respectively. Changes in the Company’s underlying foreign currency exposures, which were excluded from the assessment, generally offset changes in the fair values of the Company’s foreign currency derivatives.


AAPL Financial Statements and Supplementary Data

Index to Consolidated Financial Statements##Page Consolidated Statements of Operations for the years ended September 30, 2023, September 24, 2022 and September 25, 2021##28 Consolidated Statements of Comprehensive Income for the years ended September 30, 2023, September 24, 2022 and September 25, 2021##29 Consolidated Balance Sheets as of September 30, 2023 and September 24, 2022##30 Consolidated Statements of Shareholders’ Equity for the years ended September 30, 2023, September 24, 2022 and September 25, 2021##31 Consolidated Statements of Cash Flows for the years ended September 30, 2023, September 24, 2022 and September 25, 2021##32


AAPL Notes to Consolidated Financial Statements##33

Reports of Independent Registered Public Accounting Firm##49


All financial statement schedules have been omitted, since the required information is not applicable or is not present in amounts sufficient to require submission of the schedule, or because the information required is included in the consolidated financial statements and accompanying notes.


AAPL Apple Inc. | 2023 Form 10-K | 27

Apple Inc.


AAPL CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except number of shares, which are reflected in thousands, and per-share amounts) ########Years ended#### ####September 30, 2023####September 24, 2022####September 25, 2021 Net sales:############ Products##$##298,085##$##316,199##$##297,392 Services####85,200####78,129####68,425 Total net sales####383,285####394,328####365,817 Cost of sales:############ Products####189,282####201,471####192,266 Services####24,855####22,075####20,715 Total cost of sales####214,137####223,546####212,981 Gross margin####169,148####170,782####152,836 Operating expenses:############ Research and development####29,915####26,251####21,914 Selling, general and administrative####24,932####25,094####21,973 Total operating expenses####54,847####51,345####43,887 Operating income####114,301####119,437####108,949 Other income/(expense), net####(565)####(334)####258 Income before provision for income taxes####113,736####119,103####109,207 Provision for income taxes####16,741####19,300####14,527 Net income##$##96,995##$##99,803##$##94,680 Earnings per share:############ Basic##$##6.16##$##6.15##$##5.67 Diluted##$##6.13##$##6.11##$##5.61 Shares used in computing earnings per share:############ Basic####15,744,231####16,215,963####16,701,272 Diluted####15,812,547####16,325,819####16,864,919


See accompanying Notes to Consolidated Financial Statements.


AAPL Apple Inc. | 2023 Form 10-K | 28

Apple Inc.


AAPL CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In millions)

########Years ended#### ####September 30, 2023####September 24, 2022####September 25, 2021 Net income##$##96,995##$##99,803##$##94,680 Other comprehensive income/(loss):############ Change in foreign currency translation, net of tax####(765)####(1,511)####501 Change in unrealized gains/losses on derivative instruments, net of tax:############ Change in fair value of derivative instruments####323####3,212####32 Adjustment for net (gains)/losses realized and included in net income####(1,717)####(1,074)####1,003 Total change in unrealized gains/losses on derivative instruments####(1,394)####2,138####1,035 Change in unrealized gains/losses on marketable debt securities, net of tax:############ Change in fair value of marketable debt securities####1,563####(12,104)####(694) Adjustment for net (gains)/losses realized and included in net income####253####205####(273) Total change in unrealized gains/losses on marketable debt securities####1,816####(11,899)####(967) Total other comprehensive income/(loss)####(343)####(11,272)####569 Total comprehensive income##$##96,652##$##88,531##$##95,249


AAPL Apple Inc. | 2023 Form 10-K | 29

Apple Inc.


AAPL CONSOLIDATED BALANCE SHEETS

(In millions, except number of shares, which are reflected in thousands, and par value) ####September 30, 2023######September 24, 2022 ######ASSETS:#### Current assets:########## Cash and cash equivalents##$##29,965####$##23,646 Marketable securities####31,590######24,658 Accounts receivable, net####29,508######28,184 Vendor non-trade receivables####31,477######32,748 Inventories####6,331######4,946 Other current assets####14,695######21,223 Total current assets####143,566######135,405 Non-current assets:########## Marketable securities####100,544######120,805 Property, plant and equipment, net####43,715######42,117 Other non-current assets####64,758######54,428 Total non-current assets####209,017######217,350 Total assets##$##352,583####$##352,755 ######LIABILITIES AND SHAREHOLDERS’ EQUITY:#### Current liabilities:########## Accounts payable##$##62,611####$##64,115 Other current liabilities####58,829######60,845 Deferred revenue####8,061######7,912 Commercial paper####5,985######9,982 Term debt####9,822######11,128 Total current liabilities####145,308######153,982 Non-current liabilities:########## Term debt####95,281######98,959 Other non-current liabilities####49,848######49,142 Total non-current liabilities####145,129######148,101 Total liabilities####290,437######302,083 Commitments and contingencies########## Shareholders’ equity:########## Common stock and additional paid-in capital, $0.00001 par value: 50,400,000 shares authorized; 15,550,061 and 15,943,425 shares issued and outstanding, respectively####73,812######64,849 Accumulated deficit####(214)######(3,068) Accumulated other comprehensive loss####(11,452)######(11,109) Total shareholders’ equity####62,146######50,672 Total liabilities and shareholders’ equity##$##352,583####$##352,755


AAPL CONSOLIDATED BALANCE SHEETS


AAPL Apple Inc. | 2023 Form 10-K | 30

Apple Inc.


AAPL CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (In millions, except per-share amounts)

########Years ended#### ####September 30, 2023####September 24, 2022####September 25, 2021 Total shareholders’ equity, beginning balances##$##50,672##$##63,090##$##65,339 Common stock and additional paid-in capital:############ Beginning balances####64,849####57,365####50,779 Common stock issued####1,346####1,175####1,105 Common stock withheld related to net share settlement of equity awards####(3,521)####(2,971)####(2,627) Share-based compensation####11,138####9,280####8,108 Ending balances####73,812####64,849####57,365 Retained earnings/(Accumulated deficit):############ Beginning balances####(3,068)####5,562####14,966 Net income####96,995####99,803####94,680 Dividends and dividend equivalents declared####(14,996)####(14,793)####(14,431) Common stock withheld related to net share settlement of equity awards####(2,099)####(3,454)####(4,151) Common stock repurchased####(77,046)####(90,186)####(85,502) Ending balances####(214)####(3,068)####5,562 Accumulated other comprehensive income/(loss):############ Beginning balances####(11,109)####163####(406) Other comprehensive income/(loss)####(343)####(11,272)####569 Ending balances####(11,452)####(11,109)####163 Total shareholders’ equity, ending balances##$##62,146##$##50,672##$##63,090 Dividends and dividend equivalents declared per share or RSU##$##0.94##$##0.90##$##0.85


AAPL Apple Inc. | 2023 Form 10-K | 31

Apple Inc.


AAPL CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions)

########Years ended#### ####September 30, 2023####September 24, 2022####September 25, 2021 Cash, cash equivalents and restricted cash, beginning balances##$##24,977##$##35,929##$##39,789 Operating activities:############ Net income####96,995####99,803####94,680 Adjustments to reconcile net income to cash generated by operating activities:############ Depreciation and amortization####11,519####11,104####11,284 Share-based compensation expense####10,833####9,038####7,906 Other####(2,227)####1,006####(4,921) Changes in operating assets and liabilities:############ Accounts receivable, net####(1,688)####(1,823)####(10,125) Vendor non-trade receivables####1,271####(7,520)####(3,903) Inventories####(1,618)####1,484####(2,642) Other current and non-current assets####(5,684)####(6,499)####(8,042) Accounts payable####(1,889)####9,448####12,326 Other current and non-current liabilities####3,031####6,110####7,475 Cash generated by operating activities####110,543####122,151####104,038 Investing activities:############ Purchases of marketable securities####(29,513)####(76,923)####(109,558) Proceeds from maturities of marketable securities####39,686####29,917####59,023 Proceeds from sales of marketable securities####5,828####37,446####47,460 Payments for acquisition of property, plant and equipment####(10,959)####(10,708)####(11,085) Other####(1,337)####(2,086)####(385) Cash generated by/(used in) investing activities####3,705####(22,354)####(14,545) Financing activities:############ Payments for taxes related to net share settlement of equity awards####(5,431)####(6,223)####(6,556) Payments for dividends and dividend equivalents####(15,025)####(14,841)####(14,467) Repurchases of common stock####(77,550)####(89,402)####(85,971) Proceeds from issuance of term debt, net####5,228####5,465####20,393 Repayments of term debt####(11,151)####(9,543)####(8,750) Proceeds from/(Repayments of) commercial paper, net####(3,978)####3,955####1,022 Other####(581)####(160)####976 Cash used in financing activities####(108,488)####(110,749)####(93,353) Increase/(Decrease) in cash, cash equivalents and restricted cash####5,760####(10,952)####(3,860) Cash, cash equivalents and restricted cash, ending balances##$##30,737##$##24,977##$##35,929 Supplemental cash flow disclosure:############ Cash paid for income taxes, net##$##18,679##$##19,573##$##25,385 Cash paid for interest##$##3,803##$##2,865##$##2,687


AAPL Apple Inc. | 2023 Form 10-K | 32

Apple Inc.


AAPL Basis of Presentation and Preparation

The consolidated financial statements include the accounts of Apple Inc. and its wholly owned subsidiaries. The preparation of these consolidated financial statements and accompanying notes in conformity with GAAP requires the use of management estimates. Certain prior period amounts in the consolidated financial statements and accompanying notes have been reclassified to conform to the current period’s presentation.


The Company’s fiscal year is the 52- or 53-week period that ends on the last Saturday of September. An additional week is included in the first fiscal quarter every five or six years to realign the Company’s fiscal quarters with calendar quarters, which occurred in the first fiscal quarter of 2023. The Company’s fiscal year 2023 spanned 53 weeks, whereas fiscal years 2022 and 2021 spanned 52 weeks each. Unless otherwise stated, references to particular years, quarters, months and periods refer to the Company’s fiscal years ended in September and the associated quarters, months and periods of those fiscal years.


AAPL Revenue

The Company records revenue net of taxes collected from customers that are remitted to governmental authorities.


AAPL Share-Based Compensation

The Company recognizes share-based compensation expense on a straight-line basis for its estimate of equity awards that will ultimately vest.


AAPL Cash Equivalents

All highly liquid investments with maturities of three months or less at the date of purchase are treated as cash equivalents.


AAPL Marketable Securities

The cost of securities sold is determined using the specific identification method.


AAPL Inventories

Inventories are measured using the first-in, first-out method.


AAPL Property, Plant and Equipment

Depreciation on property, plant and equipment is recognized on a straight-line basis.


AAPL Derivative Instruments

The Company presents derivative assets and liabilities at their gross fair values in the Consolidated Balance Sheets.


AAPL Income Taxes

The Company records certain deferred tax assets and liabilities in connection with the minimum tax on certain foreign earnings created by the Act.


AAPL Leases

The Company combines and accounts for lease and nonlease components as a single lease component for leases of corporate, data center and retail facilities.


AAPL Note 2 – Revenue

The Company recognizes revenue at the amount to which it expects to be entitled when control of the products or services is transferred to its customers. Control is generally transferred when the Company has a present right to payment and title and the significant risks and rewards of ownership of products or services are transferred to its customers. For most of the Company’s Products net sales, control transfers when products are shipped. For the Company’s Services net sales, control transfers over time as services are delivered. Payment for Products and Services net sales is collected within a short period following transfer of control or commencement of delivery of services, as applicable.


AAPL Note 2 – Revenue

The Company records reductions to Products net sales related to future product returns, price protection and other customer incentive programs based on the Company’s expectations and historical experience.


AAPL Note 2 – Revenue

For arrangements with multiple performance obligations, which represent promises within an arrangement that are distinct, the Company allocates revenue to all distinct performance obligations based on their relative stand-alone selling prices (“SSPs”). When available, the Company uses observable prices to determine SSPs. When observable prices are not available, SSPs are established that reflect the Company’s best estimates of what the selling prices of the performance obligations would be if they were sold regularly on a stand-alone basis. The Company’s process for estimating SSPs without observable prices considers multiple factors that may vary depending upon the unique facts and circumstances related to each performance obligation including, where applicable, prices charged by the Company for similar offerings, market trends in the pricing for similar offerings, product-specific business objectives and the estimated cost to provide the performance obligation.


AAPL Note 2 – Revenue

The Company has identified up to three performance obligations regularly included in arrangements involving the sale of iPhone, Mac, iPad and certain other products. The first performance obligation, which represents the substantial portion of the allocated sales price, is the hardware and bundled software delivered at the time of sale. The second performance obligation is the right to receive certain product-related bundled services, which include iCloud®, Siri® and Maps. The third performance obligation is the right to receive, on a when-and-if-available basis, future unspecified software upgrades relating to the software bundled with each device. The Company allocates revenue and any related discounts to these performance obligations based on their relative SSPs. Because the Company lacks observable prices for the undelivered performance obligations, the allocation of revenue is based on the Company’s estimated SSPs. Revenue allocated to the delivered hardware and bundled software is recognized when control has transferred to the customer, which generally occurs when the product is shipped. Revenue allocated to the product-related bundled services and unspecified software upgrade rights is deferred and recognized on a straight-line basis over the estimated period they are expected to be provided.


AAPL Note 2 – Revenue

For certain long-term service arrangements, the Company has performance obligations for services it has not yet delivered. For these arrangements, the Company does not have a right to bill for the undelivered services. The Company has determined that any unbilled consideration relates entirely to the value of the undelivered services. Accordingly, the Company has not recognized revenue, and does not disclose amounts, related to these undelivered services.


AAPL Note 2 – Revenue

For the sale of third-party products where the Company obtains control of the product before transferring it to the customer, the Company recognizes revenue based on the gross amount billed to customers. The Company considers multiple factors when determining whether it obtains control of third-party products, including evaluating if it can establish the price of the product, retains inventory risk for tangible products or has the responsibility for ensuring acceptability of the product. For third-party applications sold through the App Store, the Company does not obtain control of the product before transferring it to the customer. Therefore, the Company accounts for all third-party application–related sales on a net basis by recognizing in Services net sales only the commission it retains.


AAPL Apple Inc. | 2023 Form 10-K | 34

Net sales disaggregated by significant products and services for 2023, 2022 and 2021 were as follows (in millions): ####2023####2022####2021 iPhone (1)##$##200,583##$##205,489##$##191,973 Mac (1)####29,357####40,177####35,190 iPad (1)####28,300####29,292####31,862 Wearables, Home and Accessories (1)####39,845####41,241####38,367 Services (2)####85,200####78,129####68,425 Total net sales##$##383,285##$##394,328##$##365,817


AAPL Apple Inc. | 2023 Form 10-K | 34

(1)Products net sales include amortization of the deferred value of unspecified software upgrade rights, which are bundled in the sales price of the respective product.


AAPL Apple Inc. | 2023 Form 10-K | 34

(2)Services net sales include amortization of the deferred value of services bundled in the sales price of certain products.


AAPL Apple Inc. | 2023 Form 10-K | 34

Total net sales include $8.2 billion of revenue recognized in 2023 that was included in deferred revenue as of September 24, 2022, $7.5 billion of revenue recognized in 2022 that was included in deferred revenue as of September 25, 2021, and $6.7 billion of revenue recognized in 2021 that was included in deferred revenue as of September 26, 2020.


AAPL Apple Inc. | 2023 Form 10-K | 34

The Company’s proportion of net sales by disaggregated revenue source was generally consistent for each reportable segment in Note 13, “Segment Information and Geographic Data” for 2023, 2022 and 2021, except in Greater China, where iPhone revenue represented a moderately higher proportion of net sales.


AAPL Apple Inc. | 2023 Form 10-K | 34

As of September 30, 2023 and September 24, 2022, the Company had total deferred revenue of $12.1 billion and $12.4 billion, respectively. As of September 30, 2023, the Company expects 67% of total deferred revenue to be realized in less than a year, 25% within one-to-two years, 7% within two-to-three years and 1% in greater than three years.


AAPL Note 3 – Earnings Per Share

The following table shows the computation of basic and diluted earnings per share for 2023, 2022 and 2021 (net income in millions and shares in thousands): ####2023####2022####2021 Numerator:############ Net income##$##96,995##$##99,803##$##94,680 Denominator:############ Weighted-average basic shares outstanding####15,744,231####16,215,963####16,701,272 Effect of dilutive share-based awards####68,316####109,856####163,647 Weighted-average diluted shares####15,812,547####16,325,819####16,864,919 Basic earnings per share##$##6.16##$##6.15##$##5.67 Diluted earnings per share##$##6.13##$##6.11##$##5.61


AAPL Note 3 – Earnings Per Share

Approximately 24 million restricted stock units (“RSUs”) were excluded from the computation of diluted earnings per share for 2023 because their effect would have been antidilutive.


AAPL Cash, Cash Equivalents and Marketable Securities

The following tables show the Company’s cash, cash equivalents and marketable securities by significant investment category as of September 30, 2023 and September 24, 2022 (in millions): ################2023############ ####Adjusted Cost####Unrealized Gains####Unrealized Losses####Fair Value####Cash and Cash Equivalents####Current Marketable Securities####Non-Current Marketable Securities Cash##$##28,359##$##—##$##—##$##28,359##$##28,359##$##—##$##— Level 1:############################ Money market funds####481####—####—####481####481####—####— Mutual funds and equity securities####442####12####(26)####428####—####428####— Subtotal####923####12####(26)####909####481####428####— Level 2 (1):############################ U.S. Treasury securities####19,406####—####(1,292)####18,114####35####5,468####12,611 U.S. agency securities####5,736####—####(600)####5,136####36####271####4,829 Non-U.S. government securities####17,533####6####(1,048)####16,491####—####11,332####5,159 Certificates of deposit and time deposits####1,354####—####—####1,354####1,034####320####— Commercial paper####608####—####—####608####—####608####— Corporate debt securities####76,840####6####(5,956)####70,890####20####12,627####58,243 Municipal securities####628####—####(26)####602####—####192####410 Mortgage- and asset-backed securities####22,365####6####(2,735)####19,636####—####344####19,292 Subtotal####144,470####18####(11,657)####132,831####1,125####31,162####100,544 Total (2)##$##173,752##$##30##$##(11,683)##$##162,099##$##29,965##$##31,590##$##100,544 ################2022############ ####Adjusted Cost####Unrealized Gains####Unrealized Losses####Fair Value####Cash and Cash Equivalents####Current Marketable Securities####Non-Current Marketable Securities Cash##$##18,546##$##—##$##—##$##18,546##$##18,546##$##—##$##— Level 1:############################ Money market funds####2,929####—####—####2,929####2,929####—####— Mutual funds####274####—####(47)####227####—####227####— Subtotal####3,203####—####(47)####3,156####2,929####227####— Level 2 (1):############################ U.S. Treasury securities####25,134####—####(1,725)####23,409####338####5,091####17,980 U.S. agency securities####5,823####—####(655)####5,168####—####240####4,928 Non-U.S. government securities####16,948####2####(1,201)####15,749####—####8,806####6,943 Certificates of deposit and time deposits####2,067####—####—####2,067####1,805####262####— Commercial paper####718####—####—####718####28####690####— Corporate debt securities####87,148####9####(7,707)####79,450####—####9,023####70,427 Municipal securities####921####—####(35)####886####—####266####620 Mortgage- and asset-backed securities####22,553####—####(2,593)####19,960####—####53####19,907 Subtotal####161,312####11####(13,916)####147,407####2,171####24,431####120,805 Total (2)##$##183,061##$##11##$##(13,963)##$##169,109##$##23,646##$##24,658##$##120,805


(1)The valuation techniques used to measure the fair values of the Company’s Level 2 financial instruments, which generally have counterparties with high credit ratings, are based on quoted market prices or model-driven valuations using significant inputs derived from or corroborated by observable market data.


(2)As of September 30, 2023 and September 24, 2022, total marketable securities included $13.8 billion and $12.7 billion, respectively, that were restricted from general use, related to the State Aid Decision (refer to Note 7, “Income Taxes”) and other agreements.


AAPL Apple Inc. | 2023 Form 10-K | 36

The following table shows the fair value of the Company’s non-current marketable debt securities, by contractual maturity, as of September 30, 2023 (in millions): Due after 1 year through 5 years##$##74,427 Due after 5 years through 10 years####9,964 Due after 10 years####16,153 Total fair value##$##100,544


AAPL Apple Inc. | 2023 Form 10-K | 36

The Company’s investments in marketable debt securities have been classified and accounted for as available-for-sale. The Company classifies marketable debt securities as either current or non-current based solely on each instrument’s underlying contractual maturity date.


AAPL Derivative Instruments and Hedging

The Company may use derivative instruments to partially offset its business exposure to foreign exchange and interest rate risk. However, the Company may choose not to hedge certain exposures for a variety of reasons including accounting considerations or 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 exchange or interest rates.


AAPL Derivative Instruments and Hedging

The Company classifies cash flows related to derivative instruments in the same section of the Consolidated Statements of Cash Flows as the items being hedged, which are generally classified as operating activities.


AAPL Foreign Exchange Rate Risk

To protect gross margins from fluctuations in foreign exchange rates, the Company may use forwards, options or other instruments, and may designate these instruments as cash flow hedges. The Company generally hedges portions of its forecasted foreign currency exposure associated with revenue and inventory purchases, typically for up to 12 months.


AAPL Foreign Exchange Rate Risk

To protect the Company’s foreign currency–denominated term debt or marketable securities from fluctuations in foreign exchange rates, the Company may use forwards, cross-currency swaps or other instruments. The Company designates these instruments as either cash flow or fair value hedges. As of September 30, 2023, the maximum length of time over which the Company is hedging its exposure to the variability in future cash flows for term debt–related foreign currency transactions is 19 years.


AAPL Foreign Exchange Rate Risk

The Company may also use derivative instruments that are not designated as accounting hedges to protect gross margins from certain fluctuations in foreign exchange rates, as well as to offset a portion of the foreign currency gains and losses generated by the remeasurement of certain assets and liabilities denominated in non-functional currencies.


AAPL Interest Rate Risk

To protect the Company’s term debt or marketable securities from fluctuations in interest rates, the Company may use interest rate swaps, options or other instruments. The Company designates these instruments as either cash flow or fair value hedges.


AAPL Interest Rate Risk

The notional amounts of the Company’s outstanding derivative instruments as of September 30, 2023 and September 24, 2022 were as follows (in millions): ####2023####2022 Derivative instruments designated as accounting hedges:######## Foreign exchange contracts##$##74,730##$##102,670 Interest rate contracts##$##19,375##$##20,125 Derivative instruments not designated as accounting hedges:######## Foreign exchange contracts##$##104,777##$##185,381


AAPL Apple Inc. | 2023 Form 10-K | 37

The gross fair values of the Company’s derivative assets and liabilities as of September 24, 2022 were as follows (in millions): ########2022#### ####Fair Value of Derivatives Designated as Accounting Hedges####Fair Value of Derivatives Not Designated as Accounting Hedges####Total Fair Value Derivative assets (1):############ Foreign exchange contracts##$##4,317##$##2,819##$##7,136 Derivative liabilities (2):############ Foreign exchange contracts##$##2,205##$##2,547##$##4,752 Interest rate contracts##$##1,367##$##—##$##1,367


AAPL Apple Inc. | 2023 Form 10-K | 37

(1)Derivative assets are measured using Level 2 fair value inputs and are included in other current assets and other non-current assets in the Consolidated Balance Sheet.


AAPL Apple Inc. | 2023 Form 10-K | 37

(2)Derivative liabilities are measured using Level 2 fair value inputs and are included in other current liabilities and other non-current liabilities in the Consolidated Balance Sheet.


AAPL Apple Inc. | 2023 Form 10-K | 37

The derivative assets above represent the Company’s gross credit exposure if all counterparties failed to perform. To mitigate credit risk, the Company generally uses collateral security arrangements that provide for collateral to be received or posted when the net fair values of certain derivatives fluctuate from contractually established thresholds. To further limit credit risk, the Company generally uses master netting arrangements with the respective counterparties to the Company’s derivative contracts, under which the Company is allowed to settle transactions with a single net amount payable by one party to the other. As of September 24, 2022, the potential effects of these rights of set-off associated with the Company’s derivative contracts, including the effects of collateral, would be a reduction to both derivative assets and derivative liabilities of $7.8 billion, resulting in a net derivative asset of $412 million.


AAPL Apple Inc. | 2023 Form 10-K | 37

The carrying amounts of the Company’s hedged items in fair value hedges as of September 30, 2023 and September 24, 2022 were as follows (in millions): ####2023####2022 Hedged assets/(liabilities):######## Current and non-current marketable securities##$##14,433##$##13,378 Current and non-current term debt##$##(18,247)##$##(18,739)


AAPL Trade Receivables

As of September 24, 2022, the Company had one customer that represented 10% or more of total trade receivables, which accounted for 10%. The Company’s third-party cellular network carriers accounted for 41% and 44% of total trade receivables as of September 30, 2023 and September 24, 2022, respectively. The Company requires third-party credit support or collateral from certain customers to limit credit risk.


AAPL Vendor Non-Trade Receivables

The Company has non-trade receivables from certain of its manufacturing vendors resulting from the sale of components to these vendors who manufacture subassemblies or assemble final products for the Company. The Company purchases these components directly from suppliers. The Company does not reflect the sale of these components in products net sales. Rather, the Company recognizes any gain on these sales as a reduction of products cost of sales when the related final products are sold by the Company. As of September 30, 2023, the Company had two vendors that individually represented 10% or more of total vendor non-trade receivables, which accounted for 48% and 23%. As of September 24, 2022, the Company had two vendors that individually represented 10% or more of total vendor non-trade receivables, which accounted for 54% and 13%.


AAPL Note 5 – Property, Plant and Equipment

The following table shows the Company’s gross property, plant and equipment by major asset class and accumulated depreciation as of September 30, 2023 and September 24, 2022 (in millions): ####2023####2022 Land and buildings##$##23,446##$##22,126 Machinery, equipment and internal-use software####78,314####81,060 Leasehold improvements####12,839####11,271 Gross property, plant and equipment####114,599####114,457 Accumulated depreciation####(70,884)####(72,340) Total property, plant and equipment, net##$##43,715##$##42,117


Depreciation expense on property, plant and equipment was $8.5 billion, $8.7 billion and $9.5 billion during 2023, 2022 and 2021, respectively.


AAPL Note 6 – Consolidated Financial Statement Details

The following tables show the Company’s consolidated financial statement details as of September 30, 2023 and September 24, 2022 (in millions): Other Non-Current Assets ####2023####2022 Deferred tax assets##$##17,852##$##15,375 Other non-current assets####46,906####39,053 Total other non-current assets##$##64,758##$##54,428


AAPL Other Current Liabilities

####2023####2022 Income taxes payable##$##8,819##$##6,552 Other current liabilities####50,010####54,293 Total other current liabilities##$##58,829##$##60,845


AAPL Other Non-Current Liabilities

####2023####2022 Long-term taxes payable##$##15,457##$##16,657 Other non-current liabilities####34,391####32,485 Total other non-current liabilities##$##49,848##$##49,142


AAPL Other Income/(Expense), Net

The following table shows the detail of other income/(expense), net for 2023, 2022 and 2021 (in millions): ####2023####2022####2021 Interest and dividend income##$##3,750##$##2,825##$##2,843 Interest expense####(3,933)####(2,931)####(2,645) Other income/(expense), net####(382)####(228)####60 Total other income/(expense), net##$##(565)##$##(334)##$##258


AAPL Provision for Income Taxes and Effective Tax Rate

The provision for income taxes for 2023, 2022 and 2021, consisted of the following (in millions): ####2023####2022####2021 Federal:############ Current##$##9,445##$##7,890##$##8,257 Deferred####(3,644)####(2,265)####(7,176) Total####5,801####5,625####1,081 State:############ Current####1,570####1,519####1,620 Deferred####(49)####84####(338) Total####1,521####1,603####1,282 Foreign:############ Current####8,750####8,996####9,424 Deferred####669####3,076####2,740 Total####9,419####12,072####12,164 Provision for income taxes##$##16,741##$##19,300##$##14,527


The foreign provision for income taxes is based on foreign pretax earnings of $72.9 billion, $71.3 billion and $68.7 billion in 2023, 2022 and 2021, respectively.


A reconciliation of the provision for income taxes to the amount computed by applying the statutory federal income tax rate (21% in 2023, 2022 and 2021) to income before provision for income taxes for 2023, 2022 and 2021, is as follows (dollars in millions): ####2023######2022######2021## Computed expected tax##$##23,885####$##25,012####$##22,933## State taxes, net of federal effect####1,124######1,518######1,151## Earnings of foreign subsidiaries####(5,744)######(4,366)######(4,715)## Research and development credit, net####(1,212)######(1,153)######(1,033)## Excess tax benefits from equity awards####(1,120)######(1,871)######(2,137)## Foreign-derived intangible income deduction####—######(296)######(1,372)## Other####(192)######456######(300)## Provision for income taxes##$##16,741####$##19,300####$##14,527## Effective tax rate####14.7##%####16.2##%####13.3##%


AAPL Deferred Tax Assets and Liabilities

As of September 30, 2023 and September 24, 2022, the significant components of the Company’s deferred tax assets and liabilities were (in millions): ####2023####2022 Deferred tax assets:######## Tax credit carryforwards##$##8,302##$##6,962 Accrued liabilities and other reserves####6,365####6,515 Capitalized research and development####6,294####1,267 Deferred revenue####4,571####5,742 Unrealized losses####2,447####2,913 Lease liabilities####2,421####2,400 Other####2,343####3,407 Total deferred tax assets####32,743####29,206 Less: Valuation allowance####(8,374)####(7,530) Total deferred tax assets, net####24,369####21,676 Deferred tax liabilities:######## Right-of-use assets####2,179####2,163 Depreciation####1,998####1,582 Minimum tax on foreign earnings####1,940####1,983 Unrealized gains####511####942 Other####490####469 Total deferred tax liabilities####7,118####7,139 Net deferred tax assets##$##17,251##$##14,537


As of September 30, 2023, the Company had $5.2 billion in foreign tax credit carryforwards in Ireland and $3.0 billion in California R&D credit carryforwards, both of which can be carried forward indefinitely. A valuation allowance has been recorded for the credit carryforwards and a portion of other temporary differences.


AAPL Uncertain Tax Positions

As of September 30, 2023, the total amount of gross unrecognized tax benefits was $19.5 billion, of which $9.5 billion, if recognized, would impact the Company’s effective tax rate. As of September 24, 2022, the total amount of gross unrecognized tax benefits was $16.8 billion, of which $8.0 billion, if recognized, would have impacted the Company’s effective tax rate.


AAPL Uncertain Tax Positions

The aggregate change in the balance of gross unrecognized tax benefits, which excludes interest and penalties, for 2023, 2022 and 2021, is as follows (in millions): ####2023####2022####2021 Beginning balances##$##16,758##$##15,477##$##16,475 Increases related to tax positions taken during a prior year####2,044####2,284####816 Decreases related to tax positions taken during a prior year####(1,463)####(1,982)####(1,402) Increases related to tax positions taken during the current year####2,628####1,936####1,607 Decreases related to settlements with taxing authorities####(19)####(28)####(1,838) Decreases related to expiration of the statute of limitations####(494)####(929)####(181) Ending balances##$##19,454##$##16,758##$##15,477


AAPL Uncertain Tax Positions

The Company is subject to taxation and files income tax returns in the U.S. federal jurisdiction and many state and foreign jurisdictions. Tax years after 2017 for the U.S. federal jurisdiction, and after 2014 in certain major foreign jurisdictions, remain subject to examination. Although the timing of resolution or closure of examinations is not certain, the Company believes it is reasonably possible that its gross unrecognized tax benefits could decrease in the next 12 months by as much as $4.5 billion.


AAPL European Commission State Aid Decision

On August 30, 2016, the European Commission announced its decision that Ireland granted state aid to the Company by providing tax opinions in 1991 and 2007 concerning the tax allocation of profits of the Irish branches of two subsidiaries of the Company (the “State Aid Decision”). The State Aid Decision ordered Ireland to calculate and recover additional taxes from the Company for the period June 2003 through December 2014. Irish legislative changes, effective as of January 2015, eliminated the application of the tax opinions from that date forward. The recovery amount was calculated to be €13.1 billion, plus interest of €1.2 billion. The Company and Ireland appealed the State Aid Decision to the General Court of the Court of Justice of the European Union (the “General Court”). On July 15, 2020, the General Court annulled the State Aid Decision. On September 25, 2020, the European Commission appealed the General Court’s decision to the European Court of Justice (the “ECJ”) and a hearing was held on May 23, 2023. A decision from the ECJ is expected in calendar year 2024. The Company believes it would be eligible to claim a U.S. foreign tax credit for a portion of any incremental Irish corporate income taxes potentially due related to the State Aid Decision.


On an annual basis, the Company may request approval from the Irish Minister for Finance to reduce the recovery amount for certain taxes paid to other countries. As of September 30, 2023, the adjusted recovery amount was €12.7 billion, excluding interest. The adjusted recovery amount plus interest is funded into escrow, where it will remain restricted from general use pending the conclusion of all legal proceedings. Refer to the Cash, Cash Equivalents and Marketable Securities section of Note 4, “Financial Instruments” for more information.


AAPL Note 8 – Leases

The Company has lease arrangements for certain equipment and facilities, including corporate, data center, manufacturing and retail space. These leases typically have original terms not exceeding 10 years and generally contain multiyear renewal options, some of which are reasonably certain of exercise.


AAPL Note 8 – Leases

Payments under the Company’s lease arrangements may be fixed or variable, and variable lease payments are primarily based on purchases of output of the underlying leased assets. Lease costs associated with fixed payments on the Company’s operating leases were $2.0 billion, $1.9 billion and $1.7 billion for 2023, 2022 and 2021, respectively. Lease costs associated with variable payments on the Company’s leases were $13.9 billion, $14.9 billion and $12.9 billion for 2023, 2022 and 2021, respectively.


AAPL Note 8 – Leases

The Company made $1.9 billion, $1.8 billion and $1.4 billion of fixed cash payments related to operating leases in 2023, 2022 and 2021, respectively. Noncash activities involving right-of-use (“ROU”) assets obtained in exchange for lease liabilities were $2.1 billion, $2.8 billion and $3.3 billion for 2023, 2022 and 2021, respectively.


AAPL Note 8 – Leases

The following table shows ROU assets and lease liabilities, and the associated financial statement line items, as of September 30, 2023 and September 24, 2022 (in millions): Lease-Related Assets and Liabilities##Financial Statement Line Items####2023####2022 Right-of-use assets:########## Operating leases##Other non-current assets##$##10,661##$##10,417 Finance leases##Property, plant and equipment, net####1,015####952 Total right-of-use assets####$##11,676##$##11,369 Lease liabilities:########## Operating leases##Other current liabilities##$##1,410##$##1,534 ##Other non-current liabilities####10,408####9,936 Finance leases##Other current liabilities####165####129 ##Other non-current liabilities####859####812 Total lease liabilities####$##12,842##$##12,411


AAPL Apple Inc. | 2023 Form 10-K | 42

Lease liability maturities as of September 30, 2023, are as follows (in millions): ####Operating Leases####Finance Leases####Total 2024##$##1,719##$##196##$##1,915 2025####1,875####151####2,026 2026####1,732####120####1,852 2027####1,351####52####1,403 2028####1,181####34####1,215 Thereafter####5,983####872####6,855 Total undiscounted liabilities####13,841####1,425####15,266 Less: Imputed interest####(2,023)####(401)####(2,424) Total lease liabilities##$##11,818##$##1,024##$##12,842


AAPL Apple Inc. | 2023 Form 10-K | 42

The weighted-average remaining lease term related to the Company’s lease liabilities as of September 30, 2023 and September 24, 2022 was 10.6 years and 10.1 years, respectively. The discount rate related to the Company’s lease liabilities as of September 30, 2023 and September 24, 2022 was 3.0% and 2.3%, respectively. The discount rates related to the Company’s lease liabilities are generally based on estimates of the Company’s incremental borrowing rate, as the discount rates implicit in the Company’s leases cannot be readily determined.


AAPL Apple Inc. | 2023 Form 10-K | 42

As of September 30, 2023, the Company had $544 million of future payments under additional leases, primarily for corporate facilities and retail space, that had not yet commenced. These leases will commence between 2024 and 2026, with lease terms ranging from 1 year to 21 years.


AAPL Commercial Paper

The Company issues unsecured short-term promissory notes pursuant to a commercial paper program. The Company uses net proceeds from the commercial paper program for general corporate purposes, including dividends and share repurchases. As of September 30, 2023 and September 24, 2022, the Company had $6.0 billion and $10.0 billion of commercial paper outstanding, respectively, with maturities generally less than nine months. The weighted-average interest rate of the Company’s commercial paper was 5.28% and 2.31% as of September 30, 2023 and September 24, 2022, respectively. The following table provides a summary of cash flows associated with the issuance and maturities of commercial paper for 2023, 2022 and 2021 (in millions): ####2023####2022####2021 Maturities 90 days or less:############ Proceeds from/(Repayments of) commercial paper, net##$##(1,333)##$##5,264##$##(357) Maturities greater than 90 days:############ Proceeds from commercial paper####—####5,948####7,946 Repayments of commercial paper####(2,645)####(7,257)####(6,567) Proceeds from/(Repayments of) commercial paper, net####(2,645)####(1,309)####1,379 Total proceeds from/(repayments of) commercial paper, net##$##(3,978)##$##3,955##$##1,022


AAPL Term Debt

The Company has outstanding Notes, which are senior unsecured obligations with interest payable in arrears. The following table provides a summary of the Company’s term debt as of September 30, 2023 and September 24, 2022: ##Maturities (calendar year)######2023########2022## ######Amount (in millions)####Effective Interest Rate####Amount (in millions)####Effective Interest Rate 2013 – 2022 debt issuances:################## Fixed-rate 0.000% – 4.650% notes##2024 – 2062##$##101,322####0.03% – 6.72%##$##111,824####0.03% – 4.78% Third quarter 2023 debt issuance:################## Fixed-rate 4.000% – 4.850% notes##2026 – 2053####5,250####4.04% – 4.88%####—#### Total term debt principal######106,572########111,824#### Unamortized premium/(discount) and issuance costs, net######(356)########(374)#### Hedge accounting fair value adjustments######(1,113)########(1,363)#### Total term debt######105,103########110,087#### Less: Current portion of term debt######(9,822)########(11,128)#### Total non-current portion of term debt####$##95,281######$##98,959####


AAPL Term Debt

To manage interest rate risk on certain of its U.S. dollar–denominated fixed-rate notes, the Company uses interest rate swaps to effectively convert the fixed interest rates to floating interest rates on a portion of these notes. Additionally, to manage foreign exchange rate risk on certain of its foreign currency–denominated notes, the Company uses cross-currency swaps to effectively convert these notes to U.S. dollar–denominated notes.


AAPL Term Debt

The effective interest rates for the Notes include the interest on the Notes, amortization of the discount or premium and, if applicable, adjustments related to hedging. The Company recognized $3.7 billion, $2.8 billion and $2.6 billion of interest expense on its term debt for 2023, 2022 and 2021, respectively.


AAPL Term Debt

The future principal payments for the Company’s Notes as of September 30, 2023, are as follows (in millions): 2024##$##9,943 2025####10,775 2026####12,265 2027####9,786 2028####7,800 Thereafter####56,003 Total term debt principal##$##106,572


AAPL Term Debt

As of September 30, 2023 and September 24, 2022, the fair value of the Company’s Notes, based on Level 2 inputs, was $90.8 billion and $98.8 billion, respectively.


AAPL Share Repurchase Program

During 2023, the Company repurchased 471 million shares of its common stock for $76.6 billion, excluding excise tax due under the Inflation Reduction Act of 2022. The Company’s share repurchase programs do not obligate the Company to acquire a minimum amount of shares. Under the programs, shares may be repurchased in privately negotiated or open market transactions, including under plans complying with Rule 10b5-1 under the Exchange Act.


AAPL Shares of Common Stock

The following table shows the changes in shares of common stock for 2023, 2022 and 2021 (in thousands): ##2023##2022##2021 Common stock outstanding, beginning balances##15,943,425##16,426,786##16,976,763 Common stock repurchased##(471,419)##(568,589)##(656,340) Common stock issued, net of shares withheld for employee taxes##78,055##85,228##106,363 Common stock outstanding, ending balances##15,550,061##15,943,425##16,426,786


AAPL 2022 Employee Stock Plan

The Apple Inc. 2022 Employee Stock Plan (the “2022 Plan”) is a shareholder-approved plan that provides for broad-based equity grants to employees, including executive officers, and permits the granting of RSUs, stock grants, performance-based awards, stock options and stock appreciation rights. RSUs granted under the 2022 Plan generally vest over four years, based on continued employment, and are settled upon vesting in shares of the Company’s common stock on a one-for-one basis. All RSUs granted under the 2022 Plan have dividend equivalent rights, which entitle holders of RSUs to the same dividend value per share as holders of common stock. A maximum of approximately 1.3 billion shares were authorized for issuance pursuant to 2022 Plan awards at the time the plan was approved on March 4, 2022.


AAPL 2014 Employee Stock Plan

The Apple Inc. 2014 Employee Stock Plan (the “2014 Plan”) is a shareholder-approved plan that provided for broad-based equity grants to employees, including executive officers. The 2014 Plan permitted the granting of substantially the same types of equity awards with substantially the same terms as the 2022 Plan. The 2014 Plan also permitted the granting of cash bonus awards. In the third quarter of 2022, the Company terminated the authority to grant new awards under the 2014 Plan.


AAPL Restricted Stock Units

A summary of the Company’s RSU activity and related information for 2023, 2022 and 2021, is as follows: ##Number of RSUs (in thousands)####Weighted-Average Grant Date Fair Value Per RSU####Aggregate Fair Value (in millions) Balance as of September 26, 2020##310,778##$##51.58#### RSUs granted##89,363##$##116.33#### RSUs vested##(145,766)##$##50.71#### RSUs canceled##(13,948)##$##68.95#### Balance as of September 25, 2021##240,427##$##75.16#### RSUs granted##91,674##$##150.70#### RSUs vested##(115,861)##$##72.12#### RSUs canceled##(14,739)##$##99.77#### Balance as of September 24, 2022##201,501##$##109.48#### RSUs granted##88,768##$##150.87#### RSUs vested##(101,878)##$##97.31#### RSUs canceled##(8,144)##$##127.98#### Balance as of September 30, 2023##180,247##$##135.91##$##30,860


AAPL Restricted Stock Units

The fair value as of the respective vesting dates of RSUs was $15.9 billion, $18.2 billion and $19.0 billion for 2023, 2022 and 2021, respectively. The majority of RSUs that vested in 2023, 2022 and 2021 were net share settled such that the Company withheld shares with a value equivalent to the employees’ obligation for the applicable income and other employment taxes, and remitted the cash to the appropriate taxing authorities. The total shares withheld were approximately 37 million, 41 million and 53 million for 2023, 2022 and 2021, respectively, and were based on the value of the RSUs on their respective vesting dates as determined by the Company’s closing stock price. Total payments to taxing authorities for employees’ tax obligations were $5.6 billion, $6.4 billion and $6.8 billion in 2023, 2022 and 2021, respectively.


AAPL Share-Based Compensation

The following table shows share-based compensation expense and the related income tax benefit included in the Consolidated Statements of Operations for 2023, 2022 and 2021 (in millions): ####2023####2022####2021 Share-based compensation expense##$##10,833##$##9,038##$##7,906 Income tax benefit related to share-based compensation expense##$##(3,421)##$##(4,002)##$##(4,056)


AAPL Share-Based Compensation

As of September 30, 2023, the total unrecognized compensation cost related to outstanding RSUs was $18.6 billion, which the Company expects to recognize over a weighted-average period of 2.5 years.


AAPL Unconditional Purchase Obligations

The Company has entered into certain off–balance sheet commitments that require the future purchase of goods or services (“unconditional purchase obligations”). The Company’s unconditional purchase obligations primarily consist of supplier arrangements, licensed intellectual property and content, and distribution rights. Future payments under noncancelable unconditional purchase obligations with a remaining term in excess of one year as of September 30, 2023, are as follows (in millions): 2024##$##4,258 2025####2,674 2026####3,434 2027####1,277 2028####5,878 Thereafter####3,215 Total##$##20,736


AAPL 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 resolved. The outcome of litigation is inherently uncertain. 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 greater than a recorded accrual, concerning loss contingencies for asserted legal and other claims.


AAPL Contingencies

Concentrations in the Available Sources of Supply of Materials and Product


AAPL Contingencies

Although most components essential to the Company’s business are generally available from multiple sources, certain components are currently obtained from single or limited sources. The Company also competes for various components with other participants in the markets for smartphones, personal computers, tablets, wearables and accessories. Therefore, many components used by the Company, including those that are available from multiple sources, are at times subject to industry-wide shortage and significant commodity pricing fluctuations.


AAPL Contingencies

The Company uses some custom components that are not commonly used by its competitors, and new products introduced by the Company often utilize custom components available from only one source. When a component or product uses new technologies, initial capacity constraints may exist until the suppliers’ yields have matured or their manufacturing capacities have increased. The continued availability of these components at acceptable prices, or at all, may be affected if suppliers decide to concentrate on the production of common components instead of components customized to meet the Company’s requirements.


AAPL Contingencies

Substantially all of the Company’s hardware products are manufactured by outsourcing partners that are located primarily in China mainland, India, Japan, South Korea, Taiwan and Vietnam.


AAPL Note 13 – Segment Information and Geographic Data

The Company manages its business primarily on a geographic basis. The Company’s 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 mainland, Hong Kong and Taiwan. Rest of Asia Pacific includes Australia and those Asian countries not included in the Company’s other reportable segments. Although the reportable segments provide similar hardware and software products and similar services, each one is 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 Company evaluates the performance of its reportable 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 consists of net sales to third parties, related cost of sales, and operating expenses directly attributable to the segment. The information provided to the Company’s chief operating decision maker for purposes of making decisions and assessing segment performance excludes asset information.


The following table shows information by reportable segment for 2023, 2022 and 2021 (in millions): ####2023####2022####2021 Americas:############ Net sales##$##162,560##$##169,658##$##153,306 Operating income##$##60,508##$##62,683##$##53,382 Europe:############ Net sales##$##94,294##$##95,118##$##89,307 Operating income##$##36,098##$##35,233##$##32,505 Greater China:############ Net sales##$##72,559##$##74,200##$##68,366 Operating income##$##30,328##$##31,153##$##28,504 Japan:############ Net sales##$##24,257##$##25,977##$##28,482 Operating income##$##11,888##$##12,257##$##12,798 Rest of Asia Pacific:############ Net sales##$##29,615##$##29,375##$##26,356 Operating income##$##12,066##$##11,569##$##9,817


A reconciliation of the Company’s segment operating income to the Consolidated Statements of Operations for 2023, 2022 and 2021 is as follows (in millions): ####2023####2022####2021 Segment operating income##$##150,888##$##152,895##$##137,006 Research and development expense####(29,915)####(26,251)####(21,914) Other corporate expenses, net (1)####(6,672)####(7,207)####(6,143) Total operating income##$##114,301##$##119,437##$##108,949


(1)Includes corporate marketing expenses, certain share-based compensation expenses, various nonrecurring charges, and other separately managed general and administrative costs.


AAPL Apple Inc. | 2023 Form 10-K | 47

The U.S. and China were the only countries that accounted for more than 10% of the Company’s net sales in 2023, 2022 and 2021. Net sales for 2023, 2022 and 2021 and long-lived assets as of September 30, 2023 and September 24, 2022 were as follows (in millions): ####2023####2022####2021 Net sales:############ U.S.##$##138,573##$##147,859##$##133,803 China (1)####72,559####74,200####68,366 Other countries####172,153####172,269####163,648 Total net sales##$##383,285##$##394,328##$##365,817 ####2023####2022 Long-lived assets:######## U.S.##$##33,276##$##31,119 China (1)####5,778####7,260 Other countries####4,661####3,738 Total long-lived assets##$##43,715##$##42,117


AAPL Apple Inc. | 2023 Form 10-K | 47

(1)China includes Hong Kong and Taiwan.


AAPL Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Apple Inc.


AAPL Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Apple Inc. as of September 30, 2023 and September 24, 2022, the related consolidated statements of operations, comprehensive income, shareholders’ equity and cash flows for each of the three years in the period ended September 30, 2023, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of Apple Inc. at September 30, 2023 and September 24, 2022, and the results of its operations and its cash flows for each of the three years in the period ended September 30, 2023, in conformity with U.S. generally accepted accounting principles.


We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (the “PCAOB”), Apple Inc.’s internal control over financial reporting as of September 30, 2023, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated November 2, 2023 expressed an unqualified opinion thereon.


AAPL Basis for Opinion

These financial statements are the responsibility of Apple Inc.’s management. Our responsibility is to express an opinion on Apple Inc.’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to Apple Inc. in accordance with the U.S. federal securities laws and the applicable rules and regulations of the U.S. Securities and Exchange Commission and the PCAOB.


AAPL Basis for Opinion

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.


AAPL Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates.


AAPL Uncertain Tax Positions

Description of the Matter As discussed in Note 7 to the financial statements, Apple Inc. is subject to taxation and files income tax returns in the U.S. federal jurisdiction and many state and foreign jurisdictions. As of September 30, 2023, the total amount of gross unrecognized tax benefits was $19.5 billion, of which $9.5 billion, if recognized, would impact Apple Inc.’s effective tax rate. In accounting for some of the uncertain tax positions, Apple Inc. uses significant judgment in the interpretation and application of complex domestic and international tax laws. Auditing management’s evaluation of whether an uncertain tax position is more likely than not to be sustained and the measurement of the benefit of various tax positions can be complex, involves significant judgment, and is based on interpretations of tax laws and legal rulings.


AAPL Apple Inc. | 2023 Form 10-K | 49

How We Addressed the Matter in Our Audit We tested controls relating to the evaluation of uncertain tax positions, including controls over management’s assessment as to whether tax positions are more likely than not to be sustained, management’s process to measure the benefit of its tax positions, and the development of the related disclosures. To evaluate Apple Inc.’s assessment of which tax positions are more likely than not to be sustained, our audit procedures included, among others, reading and evaluating management’s assumptions and analysis, and, as applicable, Apple Inc.’s communications with taxing authorities, that detailed the basis and technical merits of the uncertain tax positions. We involved our tax subject matter resources in assessing the technical merits of certain of Apple Inc.’s tax positions based on our knowledge of relevant tax laws and experience with related taxing authorities. For certain tax positions, we also received external legal counsel confirmation letters and discussed the matters with external advisors and Apple Inc. tax personnel. In addition, we evaluated Apple Inc.’s disclosure in relation to these matters included in Note 7 to the financial statements.


AAPL /s/ Ernst & Young LLP

We have served as Apple Inc.’s auditor since 2009.