Lecture07 2010.09.27 PostClass

Lecture07 2010.09.27 PostClass - 1 Lecture 7 Timing of...

Info iconThis preview shows pages 1–5. Sign up to view the full content.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: 1 Lecture 7 Timing of Revenue Recognition Announcements Recitation problems this week: (i) Practice exam 1: Question2: Erroneous journal entries (ii) Practice exam 1: Question3: revenue recognition for a long term contract (iii) AP4-2 Reminder: Inform us of Exam 1 conflicts by this Friday (Oct 1)! Any requests beyond that point will NOT be entertained. 2 In the news 3 New Revenue-Recognition Rules: The Apple of Apple's Eye? September 16, 2009 While Steve Jobs was preparing to introduce the new Apple iPod nano last week, the company's chief accountant, Betsy Rafael, was sending off a second letter to the Financial Accounting Standards Board related to revenue recognition. At issue: how FASB might rework the rules related to recognizing revenue for software that's bundled into a product and never sold separately. The rule is especially important to Apple because it affects the revenue related to two of the company's most successful products the iPod and the iPhone. If FASB's time line holds to form, and the rules are recast in 2011 the way Apple hopes they will be, the company could be able to book revenue faster, yielding less time between product launches and associated revenue gains. In theory, a successful launch and its attendant revenue would drive up Apple's earnings, and possibly stock price, in the same quarter the product is introduced , according to several news reports that came out earlier this week. Apple and other tech companies have been lobbying for a rewrite of the so-called multiple deliverables, or bundling, rule for quite some time. They argue that current U.S. generally accepted accounting principles make it hard for product makers to reap the full reward of successful products quickly. That's mainly because U.S. GAAP is stringent about when and how companies recognize revenue generated by software sales. " The requirements are that when you sell more than one product or service at one time, you have to break down the total sale value in[to] individual pieces. Establishing the individual values under U.S. GAAP is solely a function of how the company prices those products and services over time, " PricewaterhouseCoopers's Dean Petracca told CFO in an earlier interview. Contracts typically include such multiple "deliverables" as hardware, software, professional services, maintenance, and support all of which are valued and accounted for differently. The complex accounting rule has left many product makers waiting for a chance to voice their displeasure at the standards, and the most recent comment period saw such giants as Xerox, IBM, Dell, and Hewlett-Packard as well as relative newcomers like Palm and Tivo make their case to FASB. In all, 34 companies wrote to FASB during the month-long comment period that ended in August to register their opinions on the accounting treatment of multiple elements. In the news 4 Apple's gap is closing quickly October 11, 2009 Fortune.com Apple ( AAPL ) is scheduled to report its fiscal 2009 earnings next Monday,...
View Full Document

Page1 / 46

Lecture07 2010.09.27 PostClass - 1 Lecture 7 Timing of...

This preview shows document pages 1 - 5. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online