Share
Explore BrainMass

Apple, Inc: Revenue Recognition

Obtain Apple's annual report for the 2009 financial year. The filing date is: 2009-10-27. To make sure you have the correct file, I also provided the link: http://www.sec.gov/Archives/edgar/data/320193/000119312509214859/d10k.htm

Using the links provided, answer the following questions

Questions:
1. Refer to the revenue recognition discussion in Note 1 (page 62). In general when does Apple recognize revenue? Explain Apple's for revenue recognition criteria. Do they appear to be aligned with the revenue recognition criteria we discussed in class?
2. In the same footnote how did Apple recognize revenue for the sale of an iPhone? Record their recognition of revenue for the sale of an iPhone in the financial statements effect template. Now, obtain Apple' amended annual report (10-K/A) for the 2009 financial year.The filing date is: 2010-01-25. To make sure you have the correct file, I also provided the link: http://www.sec.gov/Archives/edgar/data/320193/000119312510012091/d10ka.htm
3. Refer to the revenue recognition discussion in Note 1 (page 30).What has changed compared to the old 10-K? Why do you think the changed occurred?
4. How does Apple now record the sale of an iPhone? Record their recognition of revenue for the sale of an IPhone under the new revenue recognition policy in the financial statements effect template.
5. What impact did the new accounting principle for revenue recognition have on Apple's balance sheet, income statement and statement of cash flow Did the new revenue recognition principle improve or weaken the company's gross margin for fiscal year 2009?

Solution Preview

Question 1
Software and software-related products - revenues from these products are accounted for "in accordance with the specific industry accounting guidance for software and software related transactions" (Apple, Inc., 2010, p. 62). This means that Apple recognizes the revenue when a sale has been constructively made - "hen persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed or determinable, and collection is probable" (Apple, Inc., 2010, p. 62). For revenues from service and support contracts, revenue is prorated over the service coverage period.

These revenue recognition principles appear to be aligned with the revenue recognition criteria discussed in class.

Question 2
Revenue from an iPhone is accounted for using subscription accounting, which means that the sales ...

Solution Summary

Impact of the new revenue recognition criteria and accounting principle for software related products on Apple's 2009 financial statements.

$2.19