...Kenneth Collins Prof. Richard Accounting 495 10/17/14 Accounting for the iPhone at Apple Inc. In 2008 Apple decided to include non-GAAP measures of earnings along with its earnings under GAAP. The results had shown that there was a 48% increase difference between the two methods. Revenues and income under non-GAAP recording are exponentially larger which seems like the obvious choice in recording revenues. However, because Apple must recognize revenues under GAAP they are required to use the “subscription method of accounting.” Under GAAP Apple is required to record under software revenue recognition. This requires that Apple have to recognize revenues and product costs on a straight line basis for the life of its service coverage periods. Revenue has to be deferred and recognized over time. The impact of this on the income statements is that reported revenues would only account for a small portion of actual sales of the product. This could make it seem as if the company isn’t as profitable as it actually is. Non-GAAP recognition on the other hand could show how much a company is actually making in a particular period. This makes it easier for a company to show its potential for future performance. Apple decided to provide its non-GAAP financial statements to show revenues without the subscription accounting method. The non-GAAP method showed revenues of $11.7 billion compared to $7.9 billion under the GAAP method. The non-GAAP method would make companies look...
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...ACCOUNTING FOR THE IPHONE AT APPLE INC. 1. Articulate the financial statement impact of the alternative accounting proposed by Apple. The alternative accounting method proposed by Apple is the Non-GAAP supplements it will continue to provide during earning releases. We want to articulate the relevant financial statement impact compared to that of subscription accounting in the following ways: (1) One-year aspect Income Statement: Revenue and cost of sales will increase because it reverses the current period’s amortization of deferred revenue derived from iPhone and Apple TV. As the profit before tax increases, the income tax will also increase. Balance Sheet: Deferred revenue will drop to zero because under the non-GAAP method, it is recognised as either current year revenue or retained earnings, thus the retained earnings will increase by a large amount. Tax liability will increase as a result of increase of profit before tax. Cash flow: The alternative use of accounting method will not cause fluctuation of cash flows. (2) Consecutive years aspect With the use of its current subscription accounting method, Apple is able to make its revenue more constant, show a positive growth in a consecutive period of time and eclipse the amount of revenue recognised from non-iPhone products. Thus the alternative accounting method can help investors to understand the financial performance better. In order to illustrate this impact on financial statement, we...
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...APPLE COMPUTER INC NYTIMES/ APPLE ANNUAL REPORT Oct 19, 2010 Apple Incorporated Apple Computer, Inc. is one of the most popular hardware and software companies in the world today. It is also the most innovative and competitive corporation in the technology industry. The Apple Corporation created mainly technological products that are available in the market these days. The company is famous for its quality and high technology innovations. Besides the current fame of the Apple Computer, Inc., like any other companies, it continuously experiences instability and uncertainty. Apple Corporation undergoes certain stages where it sees its strengths and weakness as wells as evaluates possible opportunities and threats to the company in maintaining and acquiring the status it currently has. The Apple Corporation has its strengths that set it apart from the rest. This company has made its own way on creating its name in the technology industry competing with IBM, Microsoft Corporation and other technology-based companies. Through the innovations done by the creative and talented minds in their company, the most sought after technological products today came from the Apple Computer, Inc. The Apple Corporation is the creator and maker of the widely known technological products like iPod, iPhone and Apple laptop. These creations have attracted most people specially those who are technically knowledgeable. Besides the products technical purposes, those are as well entertaining and useful...
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...Apple Inc. designs, manufactures, and markets personal computers, mobile communication devices, and portable digital music and video players and sells a variety of related software, services, peripherals, and networking solutions. The Company sells its products worldwide through its online stores, its retail stores, its direct sales force, and third-party wholesalers, resellers, and value-added resellers. (Source: Company Form 10-K) Refer to the financial reports of Apple, Inc. for the year ended September 25, 2010 +Concepts+ a. In your own words, define "revenues." Explain how revenues are different from "gains." b. Describe what it means for a business to "recognize" revenues. What specific accounts and financial statements are affected by the process of revenue recognition? Describe the revenue recognition criteria outline in the FASB's Statement of Concepts No. 5. c. Refer to the Revenue Recognition discussion in Note 1. In general, when does Apple recognize revenue? Explain Apple's four revenue recognition criteria. Do they appear to be aligned with the revenue recognition criteria you described in part b, above? d. What are multiple-element contracts and why do they pose revenue recognition problems for companies? e. In general, what incentives do managers have to make self-serving revenue recognition choices? Refer to the financial reports of Apple, Inc. for the year ended September 25, 2010 +Process+ .f. Refer to Apple's revenue recognition footnote...
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...summarize the story of Apple The founders build a company 1976-1984: Apple Computers was founded by Steve Jobs and Steve Wozniak in a California garage on April 1, 1976. The Apple II started the personal computer boom and the early success of Apple was attributed mainly to marketing and technological innovation. Apple grew quickly, staying ahead of competitors by contributing key products that stimulated the development of software for the computer. Professional managers fail to extend the company 1985-1997: Founders of Apple, Jobs and Wozniak, was departed in 1985 during a slumping market and fired by the company’s board of directors due to ego clashes and the different opinions he shared with the CEO, John Sculley. Jobs resigned and sold all but one of his Apple shares. In the early 1990s, Apple sold more personal computers than any other company in the industry. However, the period from 1993-1995 was a time of considerable change in the management of Apple. The industry changed rapidly. Apple lost its competitive advantage in the market and sales declined. After the shares of Apple plummeted down, Jobs was requested by the board of Apple to rejoin as the CEO in 1997. Jobs leads Apple “Back to the future” 1998-2001 As CEO of Apple, Jobs terminated several projects like iBook and the AirPort products series. Apple reopened its own retail stores and introduced new innovations like iPod and iTunes music store. A corporate renaissance 2002-2006 Apple expanded its business...
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...Apple Inc. designs, manufactures, and markets personal computers, mobile communication devices, and portable digital music and video players and sells a variety of related software, services, peripherals, and networking solutions. The Company sells its products worldwide through its online stores, its retail stores, its direct sales force, and third-party wholesalers, resellers, and value-added resellers. (Source: Company Form 10-K) Refer to the financial reports of Apple, Inc. for the year ended September 25, 2010 +Concepts+ a. In your own words, define "revenues." Explain how revenues are different from "gains." b. Describe what it means for a business to "recognize" revenues. What specific accounts and financial statements are affected by the process of revenue recognition? Describe the revenue recognition criteria outline in the FASB's Statement of Concepts No. 5. c. Refer to the Revenue Recognition discussion in Note 1. In general, when does Apple recognize revenue? Explain Apple's four revenue recognition criteria. Do they appear to be aligned with the revenue recognition criteria you described in part b, above? d. What are multiple-element contracts and why do they pose revenue recognition problems for companies? e. In general, what incentives do managers have to make self-serving revenue recognition choices? Refer to the financial reports of Apple, Inc. for the year ended September 25, 2010 +Process+ .f. Refer to Apple's revenue recognition footnote...
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... Accounting for the iPhone at Apple Inc. On October 21, 2008, Apple Inc. announced financial results for Q4 of FY 2008 ended September 27, 2008, (see Exhibit 1). Under the U.S. generally accepted accounting principles (GAAP), Apple reported quarterly revenue of $7.9 billion and net profit of $1.1 billion. For the first time, the Cupertino, California-based company included non-GAAP measures in its earnings announcement to supplement its U.S. GAAP financial results. Apple´s non GAAP quarterly revenue and net profit were $11.7 billion and $2.4 billion, respectively. As Apple CEO Steve Jobs noted, “As you can see the non-GAAP financial results are truly stunning” He explained the change in a rare appearance on the company´s earnings conference call later that day: I would like to … talk about the non-GAAP financial results, because I think this is a pretty big deal. In addition to reporting an outstanding quarter, today we are also introducing non-GAAP financial results, which eliminate the impact of subscription accounting. Because by its nature subscription accounting spreads the impact of iPhone´s contribution to Apple´s overall sales, gross margin, and net income over two years, it can make it more difficult for the average Apple manager or the average investor to evaluate the company´s overall performance. As long as our iPhone business was small relative to our Mac and music business, this didn´t really matter much, but the past quarter, as you heard, our iPhone business...
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...IT market place. Developing cutting edge software that is futuristic and enticing is what Apple does best. Apple has the ability to offer a diverse product line that caters to a wide variety of consumers, especially tech savvy earlier adapters. Dell’s marketing approach is to create a product line that is affordable and easily used by the general computing public. Audit reports, ratios, cash flows and income statements are analyzed to gain a clearer picture of which marketing strategy is proving to be the more successful. Corporate Histories and Strategies: In 1976, high school friends Steven Jobs and Stephen Wozniak shared a common love and interest in electronics. In their early stages, Apple I & II were designed as a hobby. Apple I was actually created in Steven’s bedroom. “They would showcase the computers at the Homebrew Computer Club (of which they were members) as a demonstration (Apple Museum, 2011)”. The highlights were the video screens, and the fact that it used few chips to operate (during this time keyboards and video screens were not well established). The blue prints/schematics were passed around freely for all to see. Stephen would go to the homes of friends and help them build their own. Their computer displays would take place at club meetings, showcasing new features and additions. Dell, Inc. began in 1984, when then freshman pre-med...
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...Accounting for iPhone at Apple Inc. 1. What is subscription accounting? Subscription accounting is a method in which to recognize the revenue and cost of goods sold are evenly divided over a specific period of time. The revenue is deferred into unearned revenue which would be considered as a liability account. This method also deals with the timing of a sale, in which the sale during the middle of the month will still be recognized in the full month. In this case, Apple uses a straight-line basis of 24 months, which is the estimated phone contract period. Apple will collect the cash from the date of the sale, but will be in a deferred account. The portions of the revenue will be recognized evenly throughout the 24 month period. Since the iPhone sends upgrades of the software, this method allows those costs to be estimated throughout the time period. Therefore this method can be considered less bias for the company. 2. Why did Jobs want to provide non-GAAP accounting data? Jobs wanted to provide non-GAAP accounting data because he believed it would “eliminate the impact of subscription accounting.” He boasted that the non-GAAP sales of 2008’s fourth quarter was $4.6 billion, totaling 39% of total revenue. Also, the research showed that investors preferred the non-GAAP data because it was easier to understand Apple’s earning and was easier to compare their data to other competitors. Overall, the non-GAAP data seem to better reflect Apple’s business, and better predicted...
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...Current Market Conditions Competitive Analysis Microeconomics 365 December 8, 2014 Introduction/ History of Apple, Inc. When participating in an increasingly competitive industry like the cell phone industry one must be prepared for any thing their competitors come out with. In order to stay ahead or at least in the game is to know your competitor and their product. Apple is one of the biggest cell phone competitors there is and knowing about them will always help out. Apple Inc. is a multinational corporation with 284 retail locations spanning 10 different countries. Apple has developed a unique reputation and is currently the largest technology firm in the world; with its stock market value reaching $500 billion in sales for 2011, (History of Apple, 2012). With headquarters located in Cupertino, California, Steve Jobs and Steve Wozniak successfully invented, and launched the first personal computer kit on April fool’s Day in 1976; known as the Apple I. The following year, the Apple computer, or Apple I, led to the incorporation of Apple Computer, Inc. As technology grew through the 80’s and 90’s, Steve and Steve continued to manufacture personal computers, or PC’s, including product lines such as Apple II, Macintosh, and Power Mac. Advancement of Apple Computer Inc. Steve and Steve continued to grow Apple Computer Inc., becoming the multinational leader in the consumer electronics industry and in 2001, dropped ‘computer’ from its name; after the successful...
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...iPhone at Apple, Inc.: The case provides students with an understanding of the criteria for revenue recognition and the role of accrual accounting in reflecting timing differences between cash receipts and product/service delivery, especially in situations where there are multiple deliverables. The case also enables students to reflect on (a) the use of supplementary non-GAAP disclosures, (b) the impact of accounting on firm value and (c) the role of companies in the standard setting process. Reading assignment: Pages 260 – 265 of the text Class notes handout. Assignment questions: 1. Complete the Oracle example in the class notes handout. (Do not turn in.) 2. Suppose a customer buys an an iPhone from Apple for $500 on January 1, 2010. The cost of the iPhone to Apple is $350. Assume that the customer is entitled to upgrades over the next two years. Use the following financial statement effects template (FSET) to illustrate the financial statement impacts for Apple of the customer's iPhone purchase on the date of the initial purchase and at the end of each of the two years following the initial purchase under generally accepted accounting principles (GAAP). | Assets | = | Liabilities | + | Owners' Equity | | Revenues | Expenses | Net Income | January 1, 2010: | +500(cash) | = | +500(deferred r) | + | 0 | | 0 | 0 | 0 | | -350(inv.) | | | | | | | | | | +350(deferred cogs) | | | | | | | | | Total Impact on January 1, 2010 | +500...
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...Business Report 1 BUSINESS REPORT ON APPLE INC. Business Report on Apple Inc. In APA Style Business Report 2 Abstract Apple Computer Inc.,, as it is known today, has gone from merely a small-time computer manufacturer into one of today’s top brand name of desktops, laptops, operating systems, mobile phones, and electronic music streaming. The company has had its ups and downs in its profitability trend, management portfolio, and over-all business operations. Yet, it has survived the demands and criticisms of the business world. Computerization is something that our world cannot do without, and Apple, along with the other companies in the same industry, is kept busy to provide users with their expectations. This paper aims to present a bird’s eye view of the Apple as what it is today, its historical background, an assessment of Apple’s future performance, and some pertinent reasons why it a good company to acquire. With the popular gadgets like the iPod and iPhone making waves in the market, it does not come as a surprise that Apple is kept on its toes to fulfill the expectations set by the demanding market. Apple is one of the leading companies in the world as evidenced by its growing sales and profits and its continuing competitive edge is one reason why remains on the top most desired to work or invest. Business...
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...Balochistan University of information techonology engineering and management sciences | Implementing Strategic Management | APPLE Inc. | Rabia Iftikhar 12285 | MBA 5th B | Jun 24, 2013 | | | | | | Ma'am Mehwish Shahid Think Different ACKNOWLEDGEMENTS Praise and thanks to “ALLAH” Almighty, the one testing us all at all times and making decisions about what we don’t know and can’t know. The report being submitted today is a result of collective effort. There are innumerous helping hands behind who have guided us on our way. Writing this report appeared to be a great experience to us. It added a lot to our knowledge. This report is one of our memorable experiences in student life. Though words are inadequate in offering thanks to our teacher but we owe our profound gratitude to Ma’am Mehwish Shahid for stimulating our creative abilities by assigning this project to us and for her able guidance and useful suggestions, which helped us in completing the project in time. Whatever we have learnt from her and this project report has put indelible impression on our minds and it is our conviction that this learning experience will always be a source of help in our practical life and professional career. Finally, yet importantly, we would like to express our heartfelt thanks to our beloved parents, for cooperation, help, kindness...
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...an increase of 4.3% over 2007. AT&T Wireless is the nation’s second largest carrier by sales and subscriptions, accounting for over 77 million customers and $69.8 billion dollars of revenue. Within AT&T the Wireless division represents the largest area of growth, compensating for customers abandoning traditional Wireline telephone service. AT&T landed a major coup in 2007 when it signed a deal with Apple to be the exclusive U.S. carrier for the iPhone. Not only did AT&T add new customers, it added more profitable customers. AT&T reports that an iPhone customer’s average revenue per user (ARPU) is $105 per month versus $60 for non-iPhone customers. AT&T’s corporate strategy for securing these profitable customers is to align itself with innovative technology, such as the iPhone, and pay a subsidy of $325 to Apple to make the iPhone more affordable for mainstream America, its target market. AT&T recoups the subsidy by locking iPhone customers into a two-year contract averaging $100 per month and maintaining this customer base through an exclusive contract with Apple. Problem Statement: Despite attracting and capturing high revenue subscribers, AT&T is experiencing high customer dissatisfaction due to congested wireless networks. The greatest threat to AT&T Wireless is that iPhone customers will defect in droves if and when AT&T loses its exclusivity contract with Apple. Our analysis will focus on the root of this issue and provide marketing, strategic, operational and...
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...of Apple Marketing Strategy on Consumer Self-concept and How Various Products Appeal to the Different Types of Self In their marketing strategy, Apple Inc capitalizes on their consumer’s self-concept such as their beliefs, opinions, preferences, attitudes and what they think about the Apples brand (Schneiders, 2011). As explained by (Budnikas, 2010), Apple Inc marketing strategy focuses on the customer experience as it is fully aware that all aspects of the consumer experience are important to the success of their brands. Apple Inc develops products that are beautifully designed, innovative, ergonomically simple to use and user friendly interface. Additionally, Apple has also spent as much time and resources on the design of their products packaging as on their products hence they have created an experience among their customers that is impossible to match. Apple Inc also uses scarcity as its marketing strategy (Katie, 2013). The company stocks a limited number of their products. Due to the limited availability of the products, people perceive their products as high quality and of great value (McCormack, 2016). This creates very long queues which helps publicize their products and increase demand. Apple has also come up with Apple Genius. These are employees trained and certified to provide technical assistance to apple stores. This creates trust in their products and conveys their products as superior. Apple Inc products include Mac, iPod, iPad, iPhone and Apple stores...
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