Apple Revenue Recogonition

Apple plebeian acknowledgment Apple Inc taxation Recognition Concepts A. revenue is crude descend a society getd or noteed from service provided or units sold, Revenue is earned regardless money come in or not at that particular time. It is assumed revenue is earned, when it is manageable, and earned. Revenues are derived from company sane operation. The company exist to carry on it is sum product or operate to the market. Gain rise from non operation activities of the entity. An asset sells cigaret be considered a gain if the company origin anyy depreciated the assets to zero, then sell it.Even know the company used the assets to generate revenue, the assets transaction is a gain, because it is not a core transmission line transaction. The primary function of a business is not to sell the assets for a gain. Any amount of gain from non operation of core business is considered to be a gain. Examples are currency gain, Short term enthronisation gain, and extraordinary gain. B. When a business recognize revenue, it means it has earned the revenue, and it is realizable in that period, which indicated a transaction, or service has occurred.The business did its obligation to bill or accepts money at that period. The business has full expectation it go forth receive the revenue in the near term depending the billing agreements. The income mastery is affected by revenue recognition, also the balance sheet is affected, and all this individuals Account due, Tax payable, COGS, change, Unearned revenue. The revenue criteria from FASB concept 5 says revenue to be recognized on the income statement, revenue must be realized, or realizable and earned. CYes, they do align with FASB standards Apple recognized revenue when telling evidence of transfer self-possession arrangement exists. 1. Entity has transferred to the buyer the signifi earth-closett risks and rewards of forgetpower of the goods 2. Entity retains neither continuing managerial involvemen t to the degree usually associated with ownership nor effective control over the goods sold 3. The amount of revenue can be measured reliably 4. It is probable that the economic benefits associated with the transaction lead flow to the entity. DThe multiple element contract is referring to the embedded unspecified kindle right that the company dexterity be obligated to provide. It is difficult to found a mo shekelsary value, because the company has to idea the cost of fire, and once they estimate the cost, the company must set deferred revenue by subtracting it from original sales agreements. The bracing rules allowed the company to estimate as low as possible because the upgrade costs are not that significant to swing the income statement. E recompense metric could be aligned with revenue growth. FITunes songs sold online on net income basis, and recognized when transaction occurred Mac-branded accessories are recognized when billed, if it sold online apple waits until cus tomers receive the items, because apple is liable until delivery. IPod sold to third party reseller in India is recognized when apple billed the third party. G Apple recognized the amount it billed its customers, apple repulses inventory risks, therefore it recognized the gross amount it billed, if it sold online from another company, apple tho recognized net sales. H 50 Mac * 2800 = 140,000Unit price 2,500 Software + 2 geezerhood service =300 Apple will recognize the whole gross sale 140,000 as revenue for 2010. Because apple took the inventory risk, Apple will bill the community college the 140,000, and recognized the same amount as the revenue. I Account receivable Dr. Cr. Sep 26,2009 $3361 $2149 Sep, 25,2010 $5510 Deferred Revenue Dr. Cr Sep,25,2009 $2906 $1217 Sep,26,2010 $4123 Net sale Dr. Cr. Sep, 26, 2009 $42,905 $22,320 Sep, 26,2010 $65,225 IJournal Entry Unearned revenue2053 barter Revenue2053 Deferred Revenue Dr. Cr Sep,25,2010 $2053 Sep,26,2009 $2053 Sep,26,2010 0 Sale Revenue Dr. Cr Sep,25,2010 $2053 Sep,26,2010 $2053 II Journal entry Cash21,225 Account receivable 44,000 Sale Revenue65,225 Unearned Revenue Dr. Cr Sep,25,2010 $2903 Sep,26,2009 $2903 Sep,26,2010 $0 Sale Revenue Dr. Cr Sep,25,2010 $2903 $62,322 Sep,26,2010 $65,225 III Journal Entry Cash44,000 Account Receivable44,000 Analysis JI under the old model revenue was deferred and recognized each course of instruction on straight line basis over its economic aliveness of the product, that under the new model Apple is able to take significant portion of the sale at the time of transaction. IIProspective can only apply to future while retrospective can apply to the retiring(a) transactions. Apple elected to use retrospective. K Iincreased its net income IIBalance sheet and Cash Flow statement (operation). IIImproved gross margin LMost of the cost good already occurred before apple was able to recognized revenue. Therefore, Apple m ust define individual account to match its expense, and revenue.MIncreased operation cash flow NAccounting rules, and procedures might be preventing unfair reporting, but it has a major flaws. One of the flows is be doesnt adapt quickly to economic condition. Accounting numbers doesnt really reflect the true(a) value of a company. Account is dawdle indicator. One industry can benefits from particular accounting procedure, and rules, but it can also hurt another industry by not reflecting true economic value. We will like to report to our shareholders actual reflection of our operation, but accounting procedures doesnt allow us to communicate the actual result.