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Should Apple Lobby The FASB To Change The Revenue Recognition Rules For Smartphones?

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Question 1: Describe GAAP vs Non-GAAP Numbers for Reporting iPhone’s Revenues
The Generally Accepted Accounting Principles (GAAP) are the precepts of standardizing financial reports for facilitating uniformity in analyzing financial statements by various stakeholders. They improve the objectivity, stability, and credibility of reporting the corporations' financial position in capital markets. Therefore, the GAAP analysis method is suited to comparing the performance of various companies in a verifiable and foolproof manner. On the contrary, the non-GAAP approach is the supplementary strategy to the GAAP technique which involves the presentation of a company’s figures. However, the accounting graphs including the regular and adjusted results …show more content…

The benefits include revenue recognition at the completion of a sale, a stable cash cycle for a firm, more money for research and development, improved annual and seasonal results; this causes a company's stock to rise making a capital acquisition and stakeholder confidence to grow as well. Due to that, the many returns realized from the non-GAAP method make it preferable for providing factual and realistic information about a company’s status in the industry.
Question 3: Should Apple Lobby the FASB to Change the Revenue Recognition Rules for Smartphones?
In my opinion, Apple should lobby the Financial Accounting Standards Board (FASB) to alter the smartphone revenue guidelines. Under the rules of GAAP, iPhone’s contribution to the overall performance of Apple Inc. occurs over a two-year period. Apple’s performance in the first quarter is likely to be affected because iPhone contributes to between 30% and 40% of the company’s total revenue. According to GAAP, the requisite costs are recorded on the onset of a sale, but the revenues are recorded when the two-year period is complete. Consequently, the company is likely to register a quarterly performance, which is undesirable to stakeholders and investors. Due to many advantages, Apple Inc. should petition to have suitable precedents for all

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