Accounting for the iPhone at Apple Inc Case Solution

Apple Inc Case Study Analysis Overview

In the beginning, Apple was able to identify the income streams that were related to its iPhone items with the use of subscription accounting tools. In 2008, however, the firm made available the non-GAAP supplemental figuresthrough which almost the entire income stream was identified immediately. The response of market players to the immediate disclosure was varied. Was Apple going in the right direction in debating that subscription accounting was insufficient and not suitable for the iPhone?

Excel Calculations

Apple Inc. Select Historical Financial Data

1b.  Apple Inc. Unaudited Condensed Consolidated Statement of Operations (in millions, except share amounts which are reflected in thousands and per share amounts)

1c.  Unaudited Condensed Balance Sheets (in millions, except share amounts)

1d.  Unaudited Condensed Consolidated Statements of Cash Flows (in millions)

1e.  Unaudited Condensed Schedule of Deferred Revenue (in millions)

1f. Unaudited Reconciliation of Non-GAAP to GAAP Results of Operations

Stock Movement

Profitability Ratios for the last Quarter

Case Study Questions and Answers

Subscription Accounting 

 Advantages:

 Disadvantages: 

Effect of Subscription Accounting on Financial Performance 

 1: EPS 

 2: ROA and ROE: 

Apple’s Financial Performance in 2008 

How could Apple Inc have avoided subscription accounting? 

Apple Inc Ratio Analysis 

 1: Return on Assets: 

 2: Return on Equity: 

 3: EPS: 

 4: Gross Profit Margin: 

Why Apple Inc used subscription accounting?