GAAP numbers for reporting iPhone’s revenues indicate that Apple recognizes the cost of goods sold as well as the revenue generated vis-à-vis the estimated economic lives. Moreover, adhering to GAAP regulations has evidently effaced the subscription accounting for the company which reduces operation costs. GAAP numbers are a direct indication of the performance of iPhones within the smartphone market. This is characteristic of the $7.9 billion revenue and $1.1 billion net profit in the quarterly reports. The non-GAAP numbers which are primarily the company’s own accounting figures depict quarterly revenue of $11.7 billion and a net profit of $2.4. This is common with non-GAAP figures which tend to portray more accurate operations of a business. With regard to balance sheets, cash flow statements and income statements, non-GAAP reports give higher values based on the fact that they are non-inclusive of non-cash and irregular expenses. For instance, one time balancing sheet adjustments are excluded prompting higher valuation for iPhones.
The non-GAAP criteria better reflects Apple’s situation. Given the rigidity with which GAAP reports are handled, it fails to capture the unique features and conditions that exist within individual businesses such as Apple in this case hence the non-GAAP approach is more reflective. Considering Apple has other products apart from the iPhone, the latter approach as stated by the late Steve Jobs offers more details in terms of total sales, net income and gross margins. Furthermore, Apple does not meet the two standards regarding revenue recognition.
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Having a uniform or standard set of rules for reporting revenues is important as it makes such reports easy to evaluate regardless of the niche occupied by the given business. Smartphones for instance are constantly growing in technology and use hence having a universal code to guide how their revenue is reported is key. Investors as well as the capital market will also have the opportunity to easily understand the reports and compare different companies with a lot of ease
