What is the main accounting change Apple is reporting?

Apple is retrospectively adopting new accounting standards (ASU 2009-13 and ASU 2009-14) that change how revenue and costs for iPhone and Apple TV are recognized. Previously, these were recognized over time due to potential future free software updates. Now, substantially all revenue and product costs will be recognized at the time of product delivery.

Why is Apple changing its accounting for iPhone and Apple TV?

The change is driven by new accounting standards that allow Apple to recognize revenue and costs upon product delivery, rather than deferring them under "subscription accounting." Apple believes this new method better reflects the underlying performance of its business and provides more comparable financial information to investors.

When do these accounting changes take effect, and how far back do they go?

Apple elected to adopt these new standards during the first quarter of fiscal 2010. The adoption is retrospective, meaning that financial results from fiscal year 2007 through fiscal year 2009 have been revised to reflect these changes as if they had always been in place.

Will this change affect Apple's reported revenue or profitability?

The filing states that the new principles will result in the recognition of substantially all revenue and product costs upon delivery. This retrospective adoption will revise past financial statements, potentially showing a different timing of revenue and profit recognition compared to previous reporting, but aims to provide a more accurate reflection of business performance.

AAPL 8-K: Earnings & Results

Summary

This 8-K filing by Apple Inc. announces the company's financial results for its first fiscal quarter ended December 26, 2009, and importantly, details the retrospective adoption of new accounting standards (ASU 2009-13 and ASU 2009-14). This change in accounting primarily affects revenue and cost recognition for iPhone and Apple TV. Previously, due to potential future free software upgrades, these products were accounted for under a "subscription accounting" method, deferring revenue and costs over the product's life. The new standards allow Apple to recognize substantially all revenue and product costs at the time of delivery, aligning with how most hardware sales are treated. This retrospective adoption revises financial results from fiscal year 2007 onwards, aiming to provide investors with more comparable and useful financial information that better reflects the underlying business performance.

Key Highlights

1Apple reported financial results for its first fiscal quarter ended December 26, 2009.
2The company adopted new accounting standards (ASU 2009-13 and ASU 2009-14) retrospectively starting in Q1 fiscal 2010.
3This change impacts revenue and cost recognition for iPhone and Apple TV.
4Previously, these products were subject to "subscription accounting" due to potential future free software updates.
5The new accounting treatment recognizes substantially all revenue and product costs upon delivery of the products.
6Financial results from fiscal year 2007 through fiscal year 2009 have been revised to reflect this retrospective adoption.
7The company believes this provides more comparable and useful financial information to analysts and investors.

Apple Inc. 8-K Report, Financial Results (Jan 25, 2010)

Summary

Key Highlights

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