Accounting for the IPhone Essay Example for Free

Accounting for the IPhone rise1. study the GAAP and Non-GAAP data and discuss their impact on the financial statements. In comparing data, when Apple describe its Q4 FY 2008 financial results on October 21, 2008, it reported both GAAP and Non-GAAP economic data. Under GAAP, Apple reported every quarter taxation of $7.9 billion and net profit of $1.1 billion. Under Non-GAAP, revenues amounted to $11.7 billion and net profit totaled $2.4 billion. The contrast between GAAP and Non-GAAP revenues and net profit were $3.8 billion and $1.3 billion respectively. Needless to say, such a vast difference will have a huge impact on the income statement and balance sheet. some(prenominal) financial statements would be greatly understated. Apple reported both GAAP and Non-GAAP financial data because of this prominent difference and they felt that the GAAP data did not correctly portray Apples financial statements.2. Which method beat out reflects the economic reality?I believe both G AAP and Non-GAAP accurately reflect Apples economic reality. severally method just simply presents Apples financial data in a different way. Under GAAP, revenue from iPhone is deferred and is recognized on a straight line basis over a 24 month period. This type of subscription accounting is required because Apple chose to give future, free software upgrades with the iPhone. GAAP requires this to prevent companies from attempt to over-inflate revenues by increasing sales with the promise of a free incentive in the future wherefore not delivering on the promise.See more Sleep Deprivation Problem Solution Speech EssayUnder GAAP, the huge annex in iPhone sales is correspond in the deferred revenue accounts and the cash from operate activities on the statement of cash flows. Apples non-GAAP statements recognize revenue from iPhone sales immediately, instead of in a deferred account, and is represented by the increase in revenue and net profit. To investors, the non-GAAP statements are more impressive because of the large increase in revenue and net profit. However, the truth of the matter is that both methods present the same information hardly in different accounts and at different times.