Cha-Ching! Accounting Rule Change Will Boost Apple’s Bottom Line

Changes to accounting rules will allow Apple to record revenue from sales of the iPhone and Apple TV at the time of sale, rather than spreading it over 24 months, Dow Jones newswire is reporting.

Financial experts predict the rule change will add significant revenue to Apple’s quarterly results, and haveupped their stock targets accordingly. CNBC’s Jim Cramer, for example, predicts Apple’s stock will hit $264 a share, in part because of the rule change (it’s trading at about $188).

Apple currently spreads revenue from iPhone and Apple TV sales over two years, like a subscription.  As a result, blockbuster sales quarters for the iPhone — like this summer’s release of the iPhone 3GS — aren’t reflected in the company’s quarterly revenue statements.

Apple uses subscription accounting for the iPhone and Apple TV because it allows the company to update the devices with new software without charging customers for new features. Apple does not do this for its iPods, which is why customers are charged nominal fees for software upgrades.

Apple lobbied the Financial Accounting Standards Board (FASB) for a change in the accounting rules. The changes were widely expected.

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