1) Articulate the financial statement impact of the alternative accounting proposed by Apple. An alternative method of accounting is Non-GAAP supplements. It will continue to ensure that during the earning releases. In order to formulate an appropriate comparison with the subscription accounting financial statements in several ways influence. It is one-year aspect and consecutive aspect. One-year aspect include income statement, cash flow and balance sheet. Apple uses measures not GAAP because they believe that these measures, taken together with the consolidated GAAP measures provide incremental insight into the key factors affecting the company's performance and future potential income. They believe that this method increases the transparency …show more content…
These revenue recognition rules require the use of the software revenue recognition on smartphones, which leads to a method of accounting subscriptions to smartphones, where part of revenues and costs are deferred to future periods. As an alternative method in its non-GAAP statement, Apple used the non-deferral of revenue and product costs for recognition in later periods. In my opinion, Apple, should not lobby for the FASB, to change the revenue recognition rules. Firstly, Apple will need to confirm its financial statements for the last 5 years, at least in order to show shareholders and investors, both as a basis for comparison of its financial performance excluding the subscription. It is a long, tedious and mundane process for the company to perform in a very short period of time, and he can not change investors view a company. Secondly, income should be recorded when all goods and services supplied. In the case of Apple, they constantly provide free software updates for every iPhone sold. Therefore, the proper use of subscription accounting method. If FASB agree to change this rule for Apple's revenue recognition, this new performance will not only affect the company itself, but to the general sector of complete …show more content…
Fourthly, other companies in the smartphone market in recent years have begun to apply the same business model as Apple, and so it will ensure comparability even if some of the costs and deferred income. In addition, Apple will be in a better position, as they will have higher values of deferred income counted in periods of low traffic. 4) Does it matter if the revenue recognition rule for smartphone changes and why? The system contributes to the deferred revenue accountability at Apple. This underlines the commitment of Apple's iPhone to its customers under their two-year contracts, and software updates throughout. The service is delivered over time, so the income is to be recorded for a long time. Changing revenue recognition rules will Apple's ratio, to create less consistent sales, impact their stock price, and incentivize companies that issue subscription as a service to recognize revenue immediately, distorting reality for those