Accounting for the IPhone Essay

1. Compare the generally accepted accounting principles and Non-GAAP selective entropy and discuss their impact on the mo kaleary statements. In comparing data, when apple account its Q4 FY 2008 financial results on October 21, 2008, it report some(prenominal) GAAP and Non-GAAP stinting data. beneath GAAP, Apple reported quarterly taxation of $7.9 billion and net profit of $1.1 billion. chthonic Non-GAAP, revenues amounted to $11.7 billion and net profit add up $2.4 billion. The unlikeness between GAAP and Non-GAAP revenues and net profit were $3.8 billion and $1.3 billion respectively. gratuitous to say, such a large difference will have a massive impact on the income statement and correspondence sheet. Both financial statements would be greatly understated. Apple reported both GAAP and Non-GAAP financial data because of this large difference and they felt that the GAAP data did non correctly portray Apples financial statements.2. Which method best reflects the econ omic reality?I believe both GAAP and Non-GAAP accurately reflect Apples economic reality. Each method just simply presents Apples financial data in a different way. beneath GAAP, revenue from iPhone is deferred and is recognized on a straight trace basis over a 24 month period. This type of subscription accounting is indispensable because Apple chose to give forthcoming, free software system upgrades with the iPhone. GAAP requires this to prevent companies from trying to over-inflate revenues by increasing gross revenue with the promise of a free incentive in the future then not delivering on the promise. involve more Sleep Deprivation job Solution Speech EssayUnder GAAP, the huge increase in iPhone sales is represented in the deferred revenue accounts and the bills from operating activities on the statement of hard currency flows. Apples non-GAAP statements recognize revenue from iPhone sales immediately, instead of in a deferred account, and is represented by the increas e 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 case is that both methods present the same information but in different accounts and at different times.