http://www.casetutors.com/2735/Accounting-forthe-iPhone-at-Apple-Inc.html Accounting for the iPhone at Apple Inc
Case ID - 111003
Solution ID - 2735
Apple Inc bundled the cost of future software upgrade in the price of iphone. This led to a grave problem as Apple had to follow the subscription method of accounting by recognizing only a portion of overall revenue. This situation adversely affected the financial performance of Apple as investors were expecting high EPS. Partially as a result the stock price of Apple plunged down by 36%. As a result of this accounting treatment the financial (profitability) ratios of Apple also suffered. Consequently keeping in mind all the investors Apple included non GAAP figures in its financial statements. However Apple was benefited as due to this free software update the app store was accessible and huge revenues were recorded from this. Excel Sheet
Apple Inc. Select Historical Financial Data
1b. Apple Inc. Unaudited Condensed Consolidated Statement of Operations (in millions, except share amounts which are reflected in thousands and per share amounts)
1c. Unaudited Condensed Balance Sheets (in millions, except share amounts) 1d. Unaudited Condensed Consolidated Statements of Cash Flows (in millions)
1e. Unaudited Condensed Schedule of Deferred Revenue (in millions) 1f. Unaudited Reconciliation of Non-GAAP to GAAP Results of Operations Stock Movement
Profitability Ratios for the last Quarter
Effect of Subscription Accounting on Financial Performance
2: ROA and ROE:
Apple’s Financial Performance in 2008
How could Apple Inc have avoided subscription accounting?
Apple Inc Ratio Analysis
1: Return on Assets:
2: Return on Equity:
4: Gross Profit Margin:
Why Apple Inc used subscription accounting?
Computers, Revenue recognition, Technology
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