Did Apple Accounting Skip Over $10 Billion in Profit?
Apple Inc.’s (NASDAQ:AAPL) most recent earnings report did not impress investors on Monday and prompted a fall in prices that leveled off toward the end of the week’s trading on Friday. A report by Reuters summed up the “disappointed” mood of Apple shareholders, but at least one interested party was left wondering why the fuss occurred at all. According to Apple Insider, a wrinkle in Apple’s accounting practices has given the tech giant $10 billion in deferred revenue that requires no further investment by the company.
In other words, that $10 billion could just as easily be viewed as profit. Apple Insider picked up the case in 2007, when Apple began a practice of accounting that did not consider revenues in hand until the end of subscriptions — Apple Care, gift cards, and the like — while considering a portion of newly sold iPhones and iPads incomplete until their software updates had been delivered over the course of two years.
As a result, Apple is holding onto a staggeringly large stockpile of cash for which it must do little in the way of obligations to book. Revenue came in higher as part of the latest earnings report, yet many were discouraged by the earnings per share miss. Considering the amount of cash being labeled as deferred income, there is reason to believe the majority of investors are ignoring the reality behind the company, according to Apple Insider.