Daniel Eran DilgerMac OS X 10.7 Lion will become available through the Mac App Store tomorrow for $29, and also begin shipping with new hardware. To properly account for the value of features Apple plans to provide over the lifecycle of the release, the company will defer $22 of revenue on each new Mac sold with Lion.
This accounting practice will enable the company to release new features without requiring users to pay an additional fee. Apple previously deferred revenue collected from iPhone buyers to account for new features it progressively added to iOS to similarly meet legal requirements pertaining to the recognition of revenue for products that are improved or changed over time.
The company did not use deferred accounting on the original iPod touch however, instead originally choosing to provide new software features via updates that required a nominal fee to obtain. That practice not only confused customers but also prevented some iPod touch users from upgrading to the latest version of iOS.
Apple wants all of its Mac and iOS users to adopt the latest available version of operating software possible, as this simplifies the task of managing software updates and patches and makes Apple's development platforms as free from software platform fragmentation as possible.
Apple will be using deferred revenue accounting for both Macs and iOS devices in order to roll out new features that are broadly and quickly adopted by users (and developers).
Among the features Apple plans to add to both Mac and iOS devices is iCloud, an assortment of web services that include Photo Stream media sync; Contacts, Calendar and Mail; and "Documents in the Cloud," a new service third party developers can tap into to keep files in sync between a user's Macs and iOS devices.
By deferring revenue from both Macs and iOS devices (Apple said it will defer $16 for each iPhone and iPad sold, and $11 for each iPod touch), Apple will be able to incrementally add iCloud features and other significant functionality without worrying about running afoul of federal accounting rules.
At the same time, third party developers can be more confident that users will seek out and use apps with iCloud integration features, as buyers won't need to subscribe to a separate service as was formerly the case with MobileMe, Apple's previous incarnation of its online services, which attracted a few million subscribers but was not universally embraced by Mac or iOS customers.
Wesley Hilliard
Malcolm Owen
Christine McKee
Andrew O'Hara
William Gallagher
Amber Neely
Andrew Orr
19 Comments
[Apple plans incremental feature additions to new Macs and iOS devices][/QUOTE]
wow now thats something I would have never guessed .. !!
[Apple plans incremental feature additions to new Macs and iOS devices]
wow now thats something I would have never guessed .. !!
GAAP requirements here, nothing to see, move along.
Is anyone a CPA that can explain Apple's accounting principals to me. It makes no sense to me that Apple would have to account for features it adds if it did not chose to. Why couldn't they simply have free updates with features?
Is anyone a CPA that can explain Apple's accounting principals to me. It makes no sense to me that Apple would have to account for features it adds if it did not chose to. Why couldn't they simply have free updates with features?
I believe the short answer is that it's a technicality: the money trail must be accounted for everywhere, and that includes where the income used to pay developers came from. Legally a product sale includes development and profit of the product at time of purchase, and future enhancements to that product will be a financial investment (paying developers, etc.) that must be accounted for.
Is anyone a CPA that can explain Apple's accounting principals to me. It makes no sense to me that Apple would have to account for features it adds if it did not chose to. Why couldn't they simply have free updates with features?
It's not Apple's rules. It's all part of the whole GAAP thing. New features (rather than just fixing problems with current ones) creates a new product if you will and it gets messy when you cross quarterly and yearly lines. By deferring part of the profit to the quarters when the features release, Apple gets around those rules.
Don't trouble yourself too much over it cause in the end it means nothing to the users