New accounting rules may boost Apple stock value
updated 12:15 pm EDT, Mon September 14, 2009
Could also remove iPod touch upgrade fees
The US government has tentatively approved new accounting rules which could significantly impact the iPhone, and possibly the iPod touch, says Fortune. Under influence from corporations like Apple, TiVo and Xerox, the government has relented to pressure and made initial changes to regulations involving subscription accounting. Because Apple releases periodic software updates for the iPhone, the company has had to spread relevant revenue reporting across a two-year time period.
In Apple's Q3 2009 results for instance, the company reported GAAP-based earnings per share (EPS) of $1.35. Without GAAP rules, the EPS was in reality $2.14. Future Apple financial reports could more accurately convey Apple's iPhone profits, and hence increase stock value.
The change could also eliminate an inconvenience with the iPod touch. Apple has long claimed that because of accounting rules, it has had no choice but to charge for upgrades to the Touch firmware, like the transition from v2.x to v3.0. The $10 fee could in fact be hindering adoption of newer technologies, and/or sales of v3.x-only titles at the App Store.
The FASB must still issue a final approval for the new rules, which are only in draft form. Apple could implement new reporting policies at the beginning of its next fiscal year, which starts at the end of the month. The company wrote the FASB earlier this month asking for more time, however, and the next FASB meeting on the topic is set for November 18th.
Fresh-Faced Recruit
Joined: Jan 2001
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I think the rules never required what Apple did (and the law should've never been passed in the first place), but as long as its clarified like this that is good. Now we'll see whether its an excuse or a real reason for what Apple did to Touch owners.