Accounting Changes Benefit Apple, and Others

[Jeff Campbell]

<div class='os_post_top_link'><a href='http://www.businessinsider.com/apples-new-iphone-accounting-could-make-earnings-look-45-bigger-stock-shoot-up-2009-9' target='_blank'>http://www.businessinsider.com/appl...shoot-up-2009-9</a><br /><br /></div><p><em>"An accounting rule change, approved yesterday, could drive Apple's reported earnings to the moon, and could send stock prices up, too."</em></p><p><em><img src="http://images.thoughtsmedia.com/resizer/thumbs/size/600/at/auto/1253802061.usr105634.jpg" style="border: 1px solid #d2d2bb;" /></em></p><p><a href="http://www.fasb.org/home" target="_blank">FASB</a>, the Financial Accounting Standards Board here in the US, approved an <a href="http://www.businessinsider.com/iphone-accounting-rule-change-unanimously-approved-2009-9" target="_blank">accounting rule change</a> regarding how companies keep track of subscription sales. Previously, when the sale was made, a company had to spread the income out over the period of the subscription. In the case of the iPhone, it was spread over 8 quarters. Now when the sale is made the income can be reported whole and not in sections, which will show true earnings for the specific reporting period. This is also why updates to the program were free for the iPhone but not for the iPod Touch. Will this change once they start using the new accounting rule and they start charging iPhone users for the updates? What are your thoughts?</p>

[doogald]

Or maybe they will not charge Touch users for upgrades, which was a silly decision anyway?

[ptyork]

Or maybe they will not charge Touch users for upgrades, which was a silly decision anyway?

Since they used the accounting rule as a lame excuse for charging for the iPod upgrades, they're going to have a hard time continuing to do so unless they now begin charging for iPhone upgrades. Should now only be possible to find an excuse to charge for neither or both. Since they'll be rightfully slaughtered by their user community and the press if they now begin charging for updates that should be free, I think we'll see two things. First, iPod touch updates will be free. Second, they'll shorten there upgrade support cycle such that after two or so years, the devices will magically no longer be able to be upgraded because the upgrades can only work if [insert latest feature here] is available. Thus, they'll perpetuate the hardware upgrade cycle by limiting software upgrades.