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Apple

How Apple’s Payment Plan Affects Revenue

Since Apple unveiled its monthly payment plan for iPhones, the consensus on Wall Street is that it could help sustain strong sales of the high-priced devices. On the flip side: Apple may be required to defer into the future some of the revenue it receives from phones sold under the plan instead of recognizing it all upfront, according to several accounting experts.

Deferring revenues for accounting purposes wouldn’t affect the cash that Apple takes in but would depress revenue it reports in financial statements, an impact which would be most obvious when the deferral policy starts. Depending on the amount of revenue deferred, and how it grows over time, it could influence investor attitudes towards Apple’s profitability and its stock price.

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Several accounting experts said Apple would need to assign a value to the right to upgrade, and then delay recognizing that revenue until it delivered the upgrade to a customer.