Apple (AAPL)

Accounting for Derivative Financial Instruments

The Company accounts for all derivatives at fair value. Derivatives that are not hedges are adjusted to fair value through income. If the derivative is a hedge, depending on the nature of the hedge, changes in fair value will either be offset against the change in fair value of the hedged assets, liabilities, or firm commitments through earnings, or recognized in other comprehensive income until the hedged item is recognized in earnings. As of June 25, 2005, the Company had a net deferred gain associated with cash flow hedges of approximately $14.9 million, net of taxes, substantially all of which is expected to be reclassified to earnings by the end of the first quarter of fiscal 2006.

Note 3 – Condensed Consolidated Financial Statement Details (in millions)

Accounting for Derivative Financial Instruments

The Company accounts for all derivatives at fair value. Derivatives that are not hedges are adjusted to fair value through income. If the derivative is a hedge, depending on the nature of the hedge, changes in fair value will either be offset against the change in fair value of the hedged assets, liabilities, or firm commitments through earnings, or recognized in other comprehensive income until the hedged item is recognized in earnings. As of March 26, 2005, the Company had a net deferred gain associated with cash flow hedges of approximately $3.8 million net of taxes, substantially all of which is expected to be reclassified to earnings by the end of the fourth quarter of fiscal 2005.

Note 3 – Condensed Consolidated Financial Statement Details (in millions)

Accounting for Derivative Financial Instruments

The Company accounts for all derivatives at fair value. Derivatives that are not hedges are adjusted to fair value through income. If the derivative is a hedge, depending on the nature of the hedge, changes in fair value will either be offset against the change in fair value of the hedged assets, liabilities, or firm commitments through earnings, or recognized in other comprehensive income until the hedged item is recognized in earnings. As of December 25, 2004, the Company had a net deferred loss associated with cash flow hedges of approximately $12.8 million net of taxes, substantially all of which is expected to be reclassified to earnings by the end of the third quarter of fiscal 2005.

Note 3 – Condensed Consolidated Financial Statement Details (in millions)