Cha-Ching! Accounting Rule Change Will Boost Apple’s Bottom Line
2:10 pm, September 23rd, 2009, Leander Kahney
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.
Apple’s shares are up about 2 percent in midday Wednesday trading.
Posted by Leander Kahney in Apple, News | Comment on this article
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“Cha-Ching!” Was hoping, beyond hope, that Midnight Apps was finally bringing their Cha-Ching finance software out of beta. Their ‘Coming Soon’ sign is quite dusty after all these years. Too bad.
Rees, on September 23rd, 2009 at 2:43 pm
Wait, wait, wait, wait, wait… does this new accounting rule mean iPhone software updates won’t be free like they used to be?
Austin, on September 23rd, 2009 at 7:07 pm
So now Apple will be able to charge for iPhone OS updates? So to get the new features of the free iTunes client downloads I’m going to have to pay to update iPhone?
No wonder this is going to affect Apples profits.
I was really hoping it would be the other way around that they would enable subscription accounting for iPod touch so you could update that for free.
Oh , I forget, this is Apple.
John, on September 23rd, 2009 at 8:21 pm