Analyst says Apple will use new reporting rules at once
Master Apple watcher and analyst Gene Munster believes that Apple will take advantage of new financial reporting rules sooner than later, perhaps even by the end of the next financial quarter.
Piper Jaffrey Apple expert Gene Munster expects Apple to take immediate advantage of newly approved accounting rules, recently vetted by the Financial Accounting Standards Board (FASB), which will allow it to more positively state earnings, especially those of the iPhone. This is an accounting change for which Apple lobbied in hard in favor, and which allows them to report iPhone earnings over a shorter period than was allowable under previous rules, which required that the earnings be spread over two years, at 12.5 percent each fiscal quarter, according to an AppleInsider story.
Munster believe the new accounting rules will allow a more accurate reflection of earnings, and one which will have a positive effect on Apple’s financial position, saying, “However, the vast majority of the value of the device was realized at the time of purchase. While the value at the time of purchase as a percentage of the purchase price is debatable, we believe about 90 percent of the value of an iPhone is realized at the time of purchase. Under the previous rules, Apple was only allowed to recognize 12.5 percent (1/8th) of the revenue from each sale; under the new rules, the percentage will be decided on a case-by-case basis for each given product.”
Munster expects that the new rules will show the finances of Apple in a more accurate light, and will tend to be a more accurate reflection of the value of the company as a whole. To this end, he has adjusted his target for the value of Apple stock from $186 to $235, a significant increase by anyone’s definition. The new accounting rules are general, not applying specifically to Apple, but will affect Apple more than most technology companies because of the growing percentage of iPhone sales in relation to its other products.
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