Segment Information and Geographic Data

12 Months Ended

Sep. 24, 2016

Segment Reporting [Abstract]

Segment Information and Geographic Data

Segment Information and Geographic Data

The Company reports segment information based on the “management” approach. The management approach designates the internal reporting used by management for making decisions and assessing performance as the source of the Company’s reportable operating segments.

The Company manages its business primarily on a geographic basis. The Company’s reportable operating segments consist of the Americas, Europe, Greater China, Japan and Rest of Asia Pacific. The Americas segment includes both North and South America. The Europe segment includes European countries, as well as India, the Middle East and Africa. The Greater China segment includes China, Hong Kong and Taiwan. The Rest of Asia Pacific segment includes Australia and those Asian countries not included in the Company’s other reportable operating segments. Although the reportable operating 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 accounting policies of the various segments are the same as those described in Note 1, “Summary of Significant Accounting Policies.”

The Company evaluates the performance of its reportable operating 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 includes net sales to third parties, related cost of sales and operating expenses directly attributable to the segment. Advertising expenses are generally included in the geographic segment in which the expenditures are incurred. Operating income for each segment excludes other income and expense and certain expenses managed outside the reportable operating segments. Costs excluded from segment operating income include various corporate expenses such as R&D, corporate marketing expenses, certain share-based compensation expenses, income taxes, various nonrecurring charges and other separately managed general and administrative costs. The Company does not include intercompany transfers between segments for management reporting purposes.

The following table shows information by reportable operating segment for 2016, 2015 and 2014 (in millions):

	2016		2015		2014
Americas:
Net sales	$	86,613	$	93,864	$	80,095
Operating income	$	28,172	$	31,186	$	26,158
Europe:
Net sales	$	49,952	$	50,337	$	44,285
Operating income	$	15,348	$	16,527	$	14,434
Greater China:
Net sales	$	48,492	$	58,715	$	31,853
Operating income	$	18,835	$	23,002	$	11,039
Japan:
Net sales	$	16,928	$	15,706	$	15,314
Operating income	$	7,165	$	7,617	$	6,904
Rest of Asia Pacific:
Net sales	$	13,654	$	15,093	$	11,248
Operating income	$	4,781	$	5,518	$	3,674

A reconciliation of the Company’s segment operating income to the Consolidated Statements of Operations for 2016, 2015 and 2014 is as follows (in millions):

	2016			2015			2014
Segment operating income	$	74,301		$	83,850		$	62,209
Research and development expense	(10,045		)	(8,067		)	(6,041		)
Other corporate expenses, net	(4,232		)	(4,553		)	(3,665		)
Total operating income	$	60,024		$	71,230		$	52,503

The U.S. and China were the only countries that accounted for more than 10% of the Company’s net sales in 2016, 2015 and 2014.There was no single customer that accounted for more than 10% of net sales in 2016, 2015 or 2014. Net sales for 2016, 2015 and 2014 and long-lived assets as of September 24, 2016 and September 26, 2015 are as follows (in millions):

	2016		2015		2014
Net sales:
U.S.	$	75,667	$	81,732	$	68,909
China (1)	46,349		56,547		30,638
Other countries	93,623		95,436		83,248
Total net sales	$	215,639	$	233,715	$	182,795

	2016		2015
Long-lived assets:
U.S.	$	16,364	$	12,022
China (1)	7,807		8,722
Other countries	2,839		3,040
Total long-lived assets	$	27,010	$	23,784

(1) China includes Hong Kong. Long-lived assets located in China consist primarily of product tooling and manufacturing process equipment and assets related to retail stores and related infrastructure.

Net sales by product for 2016, 2015 and 2014 are as follows (in millions):

	2016		2015		2014
iPhone (1)	$	136,700	$	155,041	$	101,991
iPad (1)	20,628		23,227		30,283
Mac (1)	22,831		25,471		24,079
Services (2)	24,348		19,909		18,063
Other Products (1)(3)	11,132		10,067		8,379
Total net sales	$	215,639	$	233,715	$	182,795

(1) Includes deferrals and amortization of related software upgrade rights and non-software services.

(2) Includes revenue from iTunes Store, App Store, Mac App Store, TV App Store, iBooks Store, Apple Music, AppleCare, Apple Pay, licensing and other services.

(3) Includes sales of Apple TV, Apple Watch, Beats products, iPod and Apple-branded and third-party accessories.