New Accounting Rules Could Have Big Impact on iPhone Numbers

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A proposed change in accounting rules could have a big impact on Apple's quarterly earnings numbers since the company would be able drop its current subscription accounting method for tracking iPhone sales, according to Fortune. The current rules require Apple to account for each iPhone sold over a two-year period, potentially pushing the company's quarterly sales figures artificially low.

Apple accounts for the money it makes from iPhone sales by spreading it evenly across two years so that customers don't have to pay for software updates. In comparison, iPod touch sales are counted completely in the quarter they are sold, but owners typically have to pay for major software updates.

The iPhone's success has highlighted a problem many companies have been dealing with. Apple isn't the only company that has to use subscription accounting to track a product's sales in a way that has a negative impact on shares.

For example, Apple reported earnings at US$1.35 for its third quarter thanks to subscription accounting. Without subscription accounting, that number jumped 58 percent to $2.14.

The Financial Accounting Standards Board has tentatively approved the accounting change, and will be meeting again on November 18. If the board gives the proposed change the thumbs up, several companies -- including Apple -- will likely see a boost in their quarterly earnings report numbers.

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