FASB OKs Change Allowing Companies To Speed Up Some Revenues
September 23 2009 - 12:26PM
Dow Jones News
Accounting rulemakers approved a change Wednesday that will give
a boost to technology companies and other firms by allowing them to
recognize some revenues faster.
The change okayed by the Financial Accounting Standards Board
helps companies that sell goods and services in bundles - like
smart phones and other high-tech devices combining hardware and
software, or home appliances that come with installation and
service contracts.
Under current accounting rules, companies must often defer large
portions of their revenue from such sales - recognizing them
gradually over time, instead of immediately when the sale is made.
The rule change would give companies more flexibility in crediting
more of that revenue to their results upfront.
The move wouldn't change the total revenues and earnings a
company reports over time, and the cash flowing into a company
remains the same. But companies contend the change would better
align their reported results with the true performance of their
business.
Apple Inc. (AAPL) is expected to be one of the major
beneficiaries of the change, since it would dramatically change how
the company reports revenues from its iPhone. Currently, Apple
recognizes iPhone revenue over a two-year period, and said recently
that overall revenues and earnings in its latest quarter would have
been much higher if it didn't have to defer revenues for the iPhone
and its Apple TV product. An Apple spokesman couldn't immediately
be reached for comment.
Apple has pushed for the change; among the other tech companies
that have publicly supported it are Cisco Systems Inc. (CSCO), Palm
Inc. (PALM), Xerox Corp. (XRX), Dell Inc. (DELL), International
Business Machines Corp. (IBM) and Hewlett-Packard Co. (HPQ).
The change will take effect in 2011 for most companies, though
companies will be allowed to adopt it earlier.
- Michael Rapoport, Dow Jones Newswires; 212-416-2176;
michael.rapoport@dowjones.com