Essay on Apple Case Study

897 Words Mar 24th, 2013 4 Pages
Apple Inc. Case Study A. In your own words, define “revenues.” Explain how revenues are different from “gains.”
Revenues are the monies that are brought in as a result of the business’ core functions in their respective industry. Revenues are different from gains in that revenues can be accounted for, while still taking a loss in the overall profitability. If an item were to be sold below cost, it brings revenue (selling price), but was sold at a loss. B. Describe what it means for a business to “recognize revenues.” What specific amounts and financial statements are affected by the process of revenue recognition? Describe the revenue recognition criteria outline in the FASB’s statement of Concepts No. 5.
A business can decide
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They may pose a problem when recognizing revenue, due to the fact that original GAAP criteria of determining a relative fair value determination is now out the window. Companies like Apple typically base their measurements against the relative selling price of the unit. E. In general, what incentives do managers have to make self-serving revenue recognition choices?
Managers in many cases are presented with sales incentives in a retail environment. These incentives may range from free products, to cash prizes, to trips, bonuses, etc. F. Refer to Apple’s Revenue Recognition footnote. In particular, when does the company recognize revenue for the following types of sales? I. Itunes songs sold online
Revenues are recognized in a net basis and only commissions they retain from each sale are reflected under the company’s financial statements. II. Mac-branded accessories such as headphones, power adapters, etc sold in the Apple stores. What if the accessories are sold online?
Revenues are recognized at the POS, when a fixed sales price is established, and collection is probable. For most product sales, these criteria are met when a product is shipped. Online sales are deferred until the customer receives their product, and the transfer of liability is completed. III. iPods sold to a third party reseller in India.
Revenues are

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