1) Articulate the financial statement impact of the alternative accounting proposed by Apple.
International financial reporting standards require companies to use the regular price charged when the item is sold as the best evidence of fair value. An alternative approach, in accordance with IFRS, plus a return on costs. That is, IFRS puts the onus on management to evaluate the component of the product, based on what it costs to produce a piece plus share of profit margin built into the unit. Management usually bases its estimate on historical sales, as well as current sales prices are set on the market. Cost plus margin is not allowed under GAAP.
An alternative method of accounting by Apple is Non-GAAP supplements. It will continue to ensure
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It allowed investors to truly look into the growing prospect of the company.
2) Under Apple's proposed alternative accounting, the reconciliation between net income and cash flow from operations no longer reflects changes in deferred costs and revenues related to subscription accounting as displayed under the GAAP numbers. Which method best reflects the economic reality?
Non-GAAP methods of Apple's better to reflect economic reality. However, there are still limitations as to the extent to which it does so.
This does not affect the cash flow of the business, this has affected the periodic profit that the company, which was reflecting only a fraction of the actual profit that the company made. As these deferred income increases with an increase in turnover, the actual profit for the period and the difference of profits (one quarter at a time, due to the accounting of subscription) was growing too.
Revenue and cost of sales will increase, because it changes the depreciation for the current period deferred income derived from the iPhone and Apple TV. Since the increase in profit before taxes, the income tax will also