Text 15521, 150 rader
Skriven 2007-01-21 12:18:30 av mike (1:379/45)
  Kommentar till text 15472 av Rich Gauszka (1:379/45)
Ärende: Re: Apple slimy 801.11n upgrade
=======================================
From: mike <mike@barkto.com>

On Fri, 19 Jan 2007 19:12:21 -0500, "Rich Gauszka"
<gauszka@dontspamhotmail.com> wrote:

>I don't understand that explanation -  Has Microsoft been in violation of
>Sarbanes-Oxley Act when they've added free features  ( Windows Defender ) to
>XP?


http://news.com.com/2100-1044_3-6151790.html

===
Apple's explanation of a planned Wi-Fi upgrade fee has its roots in obscure
accounting rules that tell companies how to book sales of future product
upgrades.

Apple said Thursday that it plans to charge customers $1.99 for a software
download that enables the 802.11n Wi-Fi technology currently present in almost
all MacBooks and MacBook Pros with Intel's Core 2 Duo processor. The company
says accounting rules known as generally accepted accounting principles (GAAP)
force it to ask for money for the download.

"During the past several months Apple has shipped some Macs with the hardware
to support 802.11n, but the draft of the 802.11n specification was not complete
enough to create the required software," Apple spokeswoman Lynn Fox said in an
e-mail to CNET News.com. "Now that the draft specification is complete, we are
ready to distribute the software to make the 802.11n hardware in these Macs
come to life."

But because the company has already recognized all the revenue from the sales
of those computers, it has to now charge customers at least a nominal fee in
order to establish the value of its software upgrade and satisfy an obscure
accounting regulation known as SOP 97-2, said Fox.

Apple didn't have to do it this way, say accounting experts. But the company
most likely faced difficult choices in relation to the upgrade: It could have
held off on shipping the new Macs until the upgrade software was ready. It
could have skipped the 802.11n capabilities altogether. Or it could have
deferred revenue from the new Macs until the software was ready--all unlikely
and unpalatable options.

Hence, the $1.99 fee.

Of course, back when the Macs first shipped, Apple could have told customers
that the upgrade cost was coming and avoided customer backlash over the
surprise fee, but that didn't happen either.

"To be certain, GAAP does not require companies to charge customers," said
Gerard Carney, a spokesman for the Financial Accounting Standards Board (FASB),
which updates and maintains GAAP standards for accounting. "Further, GAAP does
not tell companies how to run their business," he wrote in an e-mail.

And now, for the tricky part...
The 802.11n Wi-Fi standard delivers faster wireless connection speeds and
greater network range. It has been delayed a few times, but the Wi-Fi Alliance,
a group of companies charged with managing the standard, is getting ready to
certify products based on the specification. Apple announced at its recent
Macworld Expo in San Francisco that it would start shipping a new 802.11n
Airport Extreme Base Station and the upgrade software for $179 in February,
around the same time it will ship its Apple TV product, which also has an
802.11n chip.

Apple began selling MacBook Pro notebooks with Intel's Core 2 Duo processor in
September, later adding that chip to MacBooks and iMacs. However, the company
also included 802.11n chips in almost all of those systems without telling
buyers, Apple CEO Steve Jobs revealed at Macworld last week.

Here comes the tricky part: under accounting regulations developed over the
last several years, when companies sell a product with multiple pieces that are
delivered at different times, they must determine the separate value of each
piece of that product, accounting experts say. And the company can only record
the revenue associated with a specific piece when it is delivered to the
customer.

This is a very common practice in many industries, said Ryan LaFond, assistant
professor for accounting at the Massachusetts Institute of Technology's Sloan
School of Business. For example, magazines receive all the money for a full
year's subscription at the time the subscription is purchased, but they only
record that as revenue as each issue is delivered, deferring the remaining
balance into a liability account called unearned revenue.

But magazine readers purchase a subscription knowing they'll get an issue every
week or month, which establishes the value of each issue and lets the
accountants know how much money to recognize as revenue each month.

In order to figure out how much revenue can be booked up front, companies need
what's called "vendor-specific objective evidence" of the value of the separate
pieces of software. In other words, they need to prove how much each piece of
software would be worth if it was sold separately, as opposed to how much it's
worth in a package deal with other pieces of software.

The problem is you can't prove what some things are worth until you sell them.
What's the value of a software upgrade to 802.11n on the open market? Apple
isn't going to let any other company sell software that would upgrade a piece
of its hardware, making it almost impossible to establish a market value for
that software.

That means a company in this situation would have to defer all the revenue
associated with the product until it can establish the value of the Wi-Fi
upgrade, or until it delivers the complete set of software, said Brett Trueman,
a professor of accounting with the Anderson Business School at the University
of California at Los Angeles. So, Apple would have had to defer all the revenue
for Macs sold with the 802.11n chips from September until it delivers the
upgrade in February, and that's not a realistic option.

So now, Apple has to establish a value for the Wi-Fi upgrade in order to
satisfy the requirement to separately account for the different pieces of
software. One easy way to do that is to charge people for it.

There's absolutely nothing in the GAAP requirements that says Apple must charge
its customers for that software upgrade. The only requirement imposed by GAAP
is that Apple must account for the separate value of the 802.11n capability,
said MIT's LaFond. It can do this by creating a value at the time of purchase
or it can wait until it delivers that capability to record all the revenue
associated with the product. Now on News.com:
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Photos: A first look inside Boeing's new 747 Extra: Two hip-hop producers in
copyright trouble

Another option, if the company had wanted to keep the 802.11n capabilities
secret, is to create a "new arrangement" with the customer. Apple sold the
customer a notebook in September, and is now selling the customer 802.11n
capabilities for that notebook. These are two separate transactions that
satisfy the need to account for the undelivered 802.11n capability as well as
Apple's desire to book all the revenue for the notebook up front and keep the
use of the 802.11n chip a secret.

Any of those options would satisfy Apple's need to account for the separate
delivery times for the Macs and the 802.11n capabilities, according to several
experts interviewed for this article. But simply blaming the fee on GAAP, or on
the Sarbanes-Oxley regulations as some rumors have suggested, does not tell the
full story.

"If I'm a company, and I want to give my customer something, GAAP isn't going
to prevent you from doing that," LaFond said. But at a time when Apple's
accounting practices are under significant scrutiny from regulators looking
into the company's stock-options backdating practices, the company has to be
extra careful about following the proper procedures while keeping financial
analysts happy with strong earnings reports.
===


I am sure that multiple accountants will have multiple opinions. However, I
also suspect that Apple is being overly cautious here.

  /m

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