Saturday, May 18, 2019

Apple Revenue Recogonition

apple revenue recognition Apple Inc tax Recognition C formerlypts A. Revenue is gross meat a company received or calculate from service provided or units change, Revenue is earned regardless money come in or non at that particular time. It is assumed revenue is earned, when it is realizable, and earned. Revenues are derived from company normal operation. The company exist to wander it is core product or services to the market. Gain rise from non operation activities of the entity. An asset sells displace be considered a gain if the company originally depreciated the assets to zero, then sell it.Even know the company used the assets to retort revenue, the assets transaction is a gain, because it is not a core argumentation transaction. The primary function of a business is not to sell the assets for a gain. Any touchstone of gain from non operation of core business is considered to be a gain. Examples are currency gain, Short term investment gain, and extraordinary gain. B. When a business recognize revenue, it means it has earned the revenue, and it is realizable in that period, which indicated a transaction, or service has occurred.The business did its obligation to score or accepts money at that period. The business has full expectation it ordain receive the revenue in the near term depending the billing agreements. The income statement is affected by revenue recognition, also the balance yellow journalism is affected, and all this individuals identify receivable, Tax payable, COGS, Cash, Unearned revenue. The revenue criteria from FASB concept 5 says revenue to be know on the income statement, revenue must be realized, or realizable and earned. CYes, they do align with FASB standards Apple acknowledge revenue when persuasive evidence of transfer ownership arrangement exists. 1. Entity has transferred to the buyer the significant risks and rewards of ownership of the goods 2. Entity retains incomplete continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold 3. The amount of revenue can be measured reliably 4. It is probable that the economical benefits associated with the transaction will flow to the entity. DThe multiple element contract is referring to the embedded unspecified upgrade right that the company readiness be obligated to provide. It is difficult to put a monetary value, because the company has to calculate the cost of upgrade, and once they estimate the cost, the company must set deferred revenue by subtracting it from original sales. The new rules allowed the company to estimate as low as possible because the upgrade costs are not that significant to swing over the income statement. E Compensation metric could be aligned with revenue growth. FITunes songs sold online on net basis, and recognized when transaction occurred Mac-branded accessories are recognized when billed, if it sold online apple waits until customers receive the it ems, because apple is liable until delivery. IPod sold to ternion party reseller in India is recognized when apple billed the third party. G Apple recognized the amount it billed its customers, apple takes inventory risks, therefore it recognized the gross amount it billed, if it sold online from some other company, apple only recognized net sales. H 50 Mac * 2800 = 140,000Unit price 2,500 Software + 2 years service =300 Apple will recognize the whole gross sale 140,000 as revenue for 2010. Because apple took the inventory risk, Apple will bill the community college the 140,000, and recognized the same amount as the revenue. I Account receivable Dr. Cr. Sep 26,2009 $3361 $2149 Sep, 25,2010 $5510 Deferred Revenue Dr. Cr Sep,25,2009 $2906 $1217 Sep,26,2010 $4123 Net sale Dr. Cr. Sep, 26, 2009 $42,905 $22,320 Sep, 26,2010 $65,225 I ledger origination Unearned revenue2053 Sale Revenue2053 Deferred Revenue Dr. Cr Sep,25,2010 $2053 Sep,26,2009 $2053 Sep,26,20 10 0 Sale Revenue Dr. Cr Sep,25,2010 $2053 Sep,26,2010 $2053 II Journal entry Cash21,225 Account receivable 44,000 Sale Revenue65,225 Unearned Revenue Dr. Cr Sep,25,2010 $2903 Sep,26,2009 $2903 Sep,26,2010 $0 Sale Revenue Dr. Cr Sep,25,2010 $2903 $62,322 Sep,26,2010 $65,225 III Journal Entry Cash44,000 Account Receivable44,000 Analysis JI under the old flummox revenue was deferred and recognized each year on straight line basis over its economic life of the product, but under the new model Apple is able to take significant bundle of the sale at the time of transaction. IIProspective can only apply to future while retrospective can apply to the past transactions. Apple elected to use retrospective. K Iincreased its net income IIBalance sheet and Cash descend statement (operation). IIImproved gross margin LMost of the cost good already occurred before apple was able to recognized revenue. Therefore, Apple must adjust individual account to match its expe nse, and revenue.MIncreased operation cash flow NAccounting rules, and procedures capacity be preventing unfair reporting, but it has a major flaws. One of the flows is accounting doesnt adapt speedily to economic condition. Accounting numbers doesnt really reflect the true value of a company. Account is lagging indicator. One industry can benefits from particular accounting procedure, and rules, but it can also cause to be perceived another industry by not reflecting true economic value. We will like to report to our shareholders positive reflection of our operation, but accounting procedures doesnt allow us to communicate the actual result.

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