When Apple released its quarterly results for the 2008 fiscal it was overlooked by many that Apple has now adopted to supply two sets of quarterly results.
Apple will continue giving out GAAP (Generally Accepted Accounting Principles) results, these will include subscription based accounting for iPhones and the Apple TV. In addition Apple will offer a new set of numbers in the form of non-GAAP results which show Apple's fiscal figures if they weren't using subscription based accounting.
In the press release on Tuesday Apple wrote the following:
During fiscal 2007, the Company began selling the iPhone and Apple TV. Because the Company may provide unspecified features and additional software products to iPhone and Apple TV customers in the future free of charge, in accordance with GAAP the Company recognizes revenue and cost of goods sold for these products on a straight-line basis over their economic lives, with any loss recognized at the time of sale. Currently, the economic lives of these products are estimated to be 24 months. This accounting treatment, referred to as subscription accounting, results in the deferral of almost all of the revenue and cost of goods during the quarter in which the products are sold to the customer. Other costs related to these products, including costs for engineering, sales, marketing and warranty, are expensed as incurred. Further, the costs to develop any future unspecified features and additional software products that may eventually be provided to customers also are expensed as incurred. In contrast, the Company generally recognizes revenue and cost of goods sold for its other products, such as Macs and iPods, at the time of sale, as the Company does not provide future unspecified features or additional software products to those customers free of charge.
The biggest issue with subscription accounting is that investors, analysts and shareholders struggle to determine just how much revenue and profit is being generated by the sale of a particular unit until long after that unit has been sold.
Apple is now effectively looking at the iPhone in the same way it looks at the Mac, in that respect the iPhone would have recorded an additional $3.8 billion in revenue and an additional $1.3 billion in net income during the company's fourth fiscal quarter.
Total iPhone revenue of $4.6 billion would have represented 39 percent of Apple's adjusted overall revenue of $11.7 billion.