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Apple Revenue Recognition

Apple recognizes iPhone revenue according to GAAP accounting standards, which require deferring some revenue to later periods to match costs incurred. This causes GAAP results to differ from the non-GAAP results Apple also provides, which better reflect the true economics of iPhone sales. While GAAP rules aim to match revenue with related expenses, they may not always accurately portray the financial performance in the industry Apple operates in, but lobbying to change standards could be problematic and open to criticism.

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Katie Ernst
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265 views1 page

Apple Revenue Recognition

Apple recognizes iPhone revenue according to GAAP accounting standards, which require deferring some revenue to later periods to match costs incurred. This causes GAAP results to differ from the non-GAAP results Apple also provides, which better reflect the true economics of iPhone sales. While GAAP rules aim to match revenue with related expenses, they may not always accurately portray the financial performance in the industry Apple operates in, but lobbying to change standards could be problematic and open to criticism.

Uploaded by

Katie Ernst
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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The University of Chicago Financial Accounting 30000

Booth School of Business

Accounting for the iPhone at Apple, Inc.


Revenue Recognition

The questions 1 and 2 concern Apple’s revenue recognition policy for all of its products. The
questions 3, 4, and 5 concern Apple’s revenue recognition policy for iPhone only.

1. Estimate the amount of annual revenue that would have been reported in the fiscal year
2008 (ended September 27, 2008) if Apple had never deferred revenue on any of its
products.

2. How would Apple’s financial statements (i.e., Balance Sheet, Income Statement, and
Statement of Cash Flows) for fiscal year 2008 have changed if Apple had never deferred
revenue on any of its products?1 Ignore any potential tax effects.

3. Briefly explain how Apple recognizes iPhone revenue. Why does Apple provide non-
GAAP financial results?

4. Which set of numbers—GAAP versus non-GAAP—best reflects the economics of the


iPhone?

5. Should Apple lobby the Financial Accounting Standards Board (FASB) to change the
revenue recognition rules for smartphones?

                                                            
1
 Footnotes to Exhibit 1c provide balances for deferred revenues and costs.

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