APPLE INC

APPLE INC

Apple’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles (“US GAAP”). In terms of intangible assets, they are presented as goodwill and patents trademarks and licenses as intangible assets in the balance sheet and notes.

Innovation and product differentiation are key to Apples core business. The apple brand carries a lot of brand value, right from its products, to its stores and online platforms such as itunes and iradio. Apple also owns several patents, trademarks and licenses. All these factors combine to enable the apple brand to be a globally recognizable and sought after brands. These intangible assets also enable to charge a premium price for their products that are synonymous with extremely high quality and customer satisfaction.

As a result Intangible assets are extremely important for Apple. These elements under intangible assets that are most important to apple include patents, trademarks and licenses and goodwill from acquired companies.

The Company’s acquired intangible assets are amortized over periods typically from three to seven years. And Goodwill has not been subject to impairment test in 2011,2012 and 2013.

Apple amortizes the acquired intangible assets over periods typically from three to seven years. Intangible assets with identifiable useful live are amortized on a straight-line basis over their economic or legal life, whichever is shorter.

Year Expense Amortization

2011 $192MM

2012 $605MM

2013 $960MM

As of September 28, 2013 the remaining weighted-average amortization period for acquired intangible assets is 4.5 years.

Moreover the Apple does not amortize goodwill and intangible assets with indefinite useful lives, rather such assets are required to be tested for impairment at least annually or sooner whenever events or changes in circumstances indicate that the assets may be impaired. The Company performs its goodwill and intangible asset impairment tests in the fourth quarter of each year. It is important to note that Apple did not recognize any impairment charges related to goodwill or indefinite lived intangible assets during 2013, 2012 and 2011.

Apple explicitly states that they did not preform any impairment test on goodwill over the last three years (2011-2013). As a result the value of the company may be inflated. From an investor perspective this may discourage investment, and may overwhelm certain groups.

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