January 20, 2007
Apple And the Accountants
Apple has announced that it must charge a nominal amount for a technology upgrade to its computers in order to avoid an earnings restatement. In other words, we would like to give it away for free but accounting rules would penalize us. Accounting officials have gone nuts: "Accounting rules do not mandate behavior they just characterize events with numbers -- make a choice and we tell you what the numbers must look like." Apple is, of course, correct and the accounting officials are myopic. Accounting, tax and other regulatory rules have operational effects and companies must plan with them in mind. Revenue restatements and revenue deferrals are a messy business and should be avoided. If the small charge is necessary to do so (and here is where the argument should lie - is it necessary??), then it makes sense to do it.
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