To time provide beginning with initial sales of ipad

to time provide Beginning with initial sales of iPad in April
2010, the Company has also indicated it may from time future
unspecified software upgrades and features free of charge to
iPad customers. The Company's ESP embedded software
upgrade right included with the sale of each iPad is Slo. In
June 2010, the Come that certain previously sold iPod touch
models would receive an upgrade to iOS 4 free of charge and
to-time receive future unspecified software upgrades and
features free of charge. The Company's ESP embedded
software upgrade right included with each iPod touch sold
beginning in June 2010 is SS 2010, the Company announ of
charge and may from time Note 2 - Retrospective Adoption of
New Accounting Principles (excerpts) In September 2009, the
Financial Accounting Standards Board ("FASB") amended the
accounting standarde to revenue recognition for arrangements
with multiple deliverables and arrangements that include
software ("new accounting principles"). The new accounting
principles permitted prospective or retrospective adoption the
Company elected retrospective adoption during the first
quarter of 2010. Under the historical accounting principles,

the Company was required to account for sales of both
iPhone and Apple TV using subscription accounting because
the Company indicated it might from time to time provide
future unspecified software upgrades and features for those
products free of charge. Under subscription accounting,
revenue and associated product cost of sales for iPhone and
Apple TV were deferred at the time of sale and recognized on
a straight-line basis over each product's estimated economic
life. This resulted in the deferral of significant amounts of
revenue and cost of sales related to iPhone and Apple TV.
The new accounting principles affect the Company's
accounting for all past and current sales of iPhone, iPad,
Apple TV and for sales of iPod touch beginning in June 2010.
The new accounting principles require the Company to
account for the sale of these devices as two deliverables. The
first deliverable is the hardware and software essential to the
functionality of the hardware device delivered at the time of
sale, and the second deliverable is the right to receive on a
when-and-if available basis, future unspecified software
upgrades and features relating to the product's essential
software. The new accounting principles result in the
recognition of a substantial portion of the revenue and all
product costs from the sale of these devices at the time of
their sale. Additionally, the Company is required to estimate
a standalone selling price for the unspecified software
upgrade rights included with the sale of these devices and
recognizes that amount ratably over the 24-month estimated
life of the related hardware device.