New Rule Lets Apple Dump iPhone Subscription Accounting

The Financial Accounting Standards Board voted unanimously on Wednesday to change an outdated accounting rule that forces companies like Apple to claim some product sales over time instead of the quarter where they happened. The rule change means Apple can start fully accounting for iPhone and Apple TV sales when they happen instead of slowly trickling out the revenue over a two year period.

The rule change is good news for any company that's been forced to string out revenues over several quarters, but the success of the iPhone makes the new accounting procedure even more enticing for Apple. The company has been pointing out in its quarterly earnings reports that its earnings would be higher if iPhone sales were counted fully in the quarter they happened.

The iPhone's success highlighted a problem many companies have been dealing with since Apple isn't the only company that was locked into subscription accounting to track a product's sales in a way that could negatively impact shares. For example, Apple reported earnings at US$1.35 for its third quarter thanks to subscription accounting, but without subscription accounting, that number jumped 58 percent to $2.14.

For the average Apple follower, the accounting changes could make it look like the company is suddenly earning substantially more money. For savvy investors, however, the new numbers won't come as a surprise since they've been following Apple's earning reports and have already seen the dual figures, according to Forbes.

There may, however, still be a surprise or two waiting for investors since many underestimate iPhone performance, and that could lead to some higher than expected reports from Apple.