Apple Inc. 10-Q form for quarterly period ended 2024-06-29, page 8: |    |                                           |                    |         |                 |    |                  |    |           |                         |          |                             |                                 |         |        |    |        |         |    |        |    |         |
|---:|:------------------------------------------|:-------------------|:--------|:----------------|:---|:-----------------|:---|:----------|:------------------------|:---------|:----------------------------|:--------------------------------|:--------|:-------|:---|:-------|:--------|:---|:-------|:---|:--------|
|  1 |                                           | September 30, 2023 |         |                 |    |                  |    |           |                         |          |                             |                                 |         |        |    |        |         |    |        |    |         |
|  2 |                                           | AdjustedCost       |         | UnrealizedGains |    | UnrealizedLosses |    | FairValue | Cash andCashEquivalents |          | CurrentMarketableSecurities | Non-CurrentMarketableSecurities |         |        |    |        |         |    |        |    |         |
|  3 | Cash                                      | $                  | 28,359  |                 |    | $                | -  |           | $                       | -        |                             | $                               | 28,359  |        | $  | 28,359 |         | $  | -      | $  | -       |
|  4 | Level 1:                                  |                    |         |                 |    |                  |    |           |                         |          |                             |                                 |         |        |    |        |         |    |        |    |         |
|  5 | Money market funds                        | 481                |         |                 | -  |                  |    | -         |                         | 481      |                             | 481                             |         | -      |    |        | -       |    |        |    |         |
|  6 | Mutual funds and equity securities        | 442                |         |                 | 12 |                  |    | (26)      |                         | 428      |                             | -                               |         | 428    |    |        | -       |    |        |    |         |
|  7 | Subtotal                                  | 923                |         |                 | 12 |                  |    | (26)      |                         | 909      |                             | 481                             |         | 428    |    |        | -       |    |        |    |         |
|  8 | Level 2 (1):                              |                    |         |                 |    |                  |    |           |                         |          |                             |                                 |         |        |    |        |         |    |        |    |         |
|  9 | U.S. Treasury securities                  | 19,406             |         |                 | -  |                  |    | (1,292)   |                         | 18,114   |                             | 35                              |         | 5,468  |    |        | 12,611  |    |        |    |         |
| 10 | U.S. agency securities                    | 5,736              |         |                 | -  |                  |    | (600)     |                         | 5,136    |                             | 36                              |         | 271    |    |        | 4,829   |    |        |    |         |
| 11 | Non-U.S. government securities            | 17,533             |         |                 | 6  |                  |    | (1,048)   |                         | 16,491   |                             | -                               |         | 11,332 |    |        | 5,159   |    |        |    |         |
| 12 | Certificates of deposit and time deposits | 1,354              |         |                 | -  |                  |    | -         |                         | 1,354    |                             | 1,034                           |         | 320    |    |        | -       |    |        |    |         |
| 13 | Commercial paper                          | 608                |         |                 | -  |                  |    | -         |                         | 608      |                             | -                               |         | 608    |    |        | -       |    |        |    |         |
| 14 | Corporate debt securities                 | 76,840             |         |                 | 6  |                  |    | (5,956)   |                         | 70,890   |                             | 20                              |         | 12,627 |    |        | 58,243  |    |        |    |         |
| 15 | Municipal securities                      | 628                |         |                 | -  |                  |    | (26)      |                         | 602      |                             | -                               |         | 192    |    |        | 410     |    |        |    |         |
| 16 | Mortgage- and asset-backed securities     | 22,365             |         |                 | 6  |                  |    | (2,735)   |                         | 19,636   |                             | -                               |         | 344    |    |        | 19,292  |    |        |    |         |
| 17 | Subtotal                                  | 144,470            |         |                 | 18 |                  |    | (11,657)  |                         | 132,831  |                             | 1,125                           |         | 31,162 |    |        | 100,544 |    |        |    |         |
| 18 | Total (2)                                 | $                  | 173,752 |                 |    | $                | 30 |           | $                       | (11,683) |                             | $                               | 162,099 |        | $  | 29,965 |         | $  | 31,590 | $  | 100,544 |
(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 June 29, 2024 and September 30, 2023, total marketable securities included $14.1 billion and $13.8 billion, respectively, that were restricted from general use, related to the State Aid Decision (refer to Note 6, "Income Taxes") and other agreements.
The following table shows the fair value of the Company's non-current marketable debt securities, by contractual maturity, as of June 29, 2024 (in millions):
|    |                                    |        |        |
|---:|:-----------------------------------|:-------|:-------|
|  1 | Due after 1 year through 5 years   | $      | 64,209 |
|  2 | Due after 5 years through 10 years | 8,660  |        |
|  3 | Due after 10 years                 | 18,371 |        |
|  4 | Total fair value                   | $      | 91,240 |

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.

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.
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 June 29, 2024, 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 18 years.
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.

Apple Inc. | Q3 2024 Form 10-Q | 8







Question: How does Apple manage its exposure to fluctuations in currency values through its hedging strategies in the quarter ended June 29, 2024?
Answer: Apple manages its exposure to currency value fluctuations through a comprehensive hedging strategy involving the use of derivative instruments such as forwards, options, and cross-currency swaps. These tools help mitigate risks associated with foreign exchange rate changes, protecting the company’s financial performance. To safeguard its forecasted revenue and inventory purchases, Apple employs cash flow hedges, typically covering a 12-month period. Additionally, for foreign currency-denominated term debt and marketable securities, the company uses forwards and cross-currency swaps designated as cash flow or fair value hedges, with some positions extending up to 18 years. Beyond designated hedges, Apple also utilizes other derivative instruments to shield its gross margins from certain currency fluctuations and to offset foreign currency gains or losses from remeasuring assets and liabilities denominated in non-functional currencies. Despite these strategies, Apple acknowledges that its hedges may only partially offset the financial impacts of foreign exchange and interest rate movements​.