“I assumed that Apple will sell 11M iPhones in Q4 2009 and report them using subscription accounting,” Sidahmed writes. “This leaves nearly $14B in deferred iPhone revenues going into 2010 – the leftovers.”
How will Apple account for these? I don’t know what the FASB rule change will say, but I can think of 3 scenarios:
1. Restate all past income and recognize iPhone revenues in the quarter of actual sale.
2. Recognize all deferred iPhone revenues in Q1 2010 and get a huge bump in EPS all at once.
3. Recognize the deferred revenues over the next 2 years.
“I think scenario #1 is just too hard and too expensive. Apple would have to go back to the beginning of 2007 when the Apple TV came out. Scenario #2 is simple, but they may run into problems with carrier revenue which will be paying out till the middle of 2010. Carrier payments justifiably belong under subscription accounting,” Sidahmed writes. “I think the cleanest scenario is #3. The system is already in place. The down side is that is will continue to skew earning[s] for another 2 years.”
There’s much more in the full article here.
[Thanks to MacDailyNews Reader “Carl H.” for the heads up.]