I have checked with an accounting expert -- and this guy knows what he is talking about. Here's the scoop.
1) Apple's logic (if it was, indeed, their logic -- sounded like it was some unnamed outside accountant quoted in the story) is bull. (The actual words my friend used were: "it is a rationalization without substance.")
2) If a product or service is "substantially complete" when it is sold, all the revenue can be recognized up front. When you sell a $2000 product, a $5 add-on is basically "not material." Materiality is the crucial issue.
3) Sar-box (as I suspected) has little to with this -- it has very few, if any, requirements on the content of accounting rules, but rather, focuses on the process of adopting and impementing these rules.
So there you have it. Apple's $5 charge is silly.
Your accounting expert is absoutely correct. Apple's charge is silly on its face. But that's not the crucial issue. The crucial issue is what he states in point #3: "...the process of adopting and impementing these rules."
Apple could argue the point made in #2 ... and most likely win in court against any possible earnings-statement lawsuit. But at what legal cost? And what would just the announcement of a lawsuit do to Apple's stock price? And if the stock price dropped, couldn't a shareholder then sue Apple because "the stock price wouldn't have dropped if Apple took the MOST CONSERVATIVE route when it came to its accounting practices?"
Remember, this is a company still in the midst of an options brouhaha. The last thing it needs is a lawsuit because of ANY questionable accounting practice, defendible or not, no matter how small or insignificant it may be.
Bottom line: This is not about accounting. This is about lawsuit protection.
This is a wonderful idea ... but for an accountant, it's legally impossible to enter it as $0 on the balance sheet. The freeware has to cost Apple something to develop, debug and distribute it. It has to show up as an expense (negative number) somewhere on the balance sheet. Without going into the accounting nitty gritty, that negative number could, for a zealous auditor or lawsuit lover, put Apple's previous financial statements into question. That would be bad for Apple.
No accounting violation at all - I'm not sure how this relates to Apple, because your upgrade I presume is available to ALL cable subscribers, not just a certain few. Now if only people with a certain modem can get the upgrade, then it opens up a can of worms, I suppose.
This is more accounting-gone-wild stuff.
1) Companies CAN and DO give lots of stuff away for free -- heard of Netscape's original business model? Also, a number of things were (and continue to be) registered as being worth $0 in financial statements -- remember stock options until this year?
2) Companies CAN and DO offer all types of upgrades/goodies/freebies to customer subsets depending on the tier of customer or lifetime value of customer etc. Consider the example of Amex. A Platimun Card member gets free airport lounge access in three airlines, while the Gold card gets none; the Centurion card member gets access to EVERY major airline lounge worldwide but the Platinum card gets only three.
3) You are basically implying that accountants can start to interfere with a company's business strategy (e.g., the way it builds its customer loyalty) -- I am sure you all want to, but you'd be booted out in a second for that kind of arrogance.
The Sarbanes-Oxley thing is no bull. I did work for Apple on something that was constrained by the very same issue. They are definitely concerned internally of possibility that "adding features to a completed product" may expose them to SOX liability. I know it sounds utterly ridiculous, but this is the legal climate we're in, or at least Apple's interpretation thereof. It's not about wanting to deliberately nickel-and-dime people.
It seems to me, though, that Leopard could include activation of 802.11n, so this $5 thing should eventually be a moot point.
You are basically implying that accountants can start to interfere with a company's business strategy (e.g., the way it builds its customer loyalty) -- I am sure you all want to, but you'd be booted out in a second for that kind of arrogance.
Yes, completely Accounting Gone Wild. Geez, imagine that video...
This is off-topic, but I had to respond that when accountants STOP interfering with a company's business strategy ... you get Enron. So please don't hate on the legit number-kruncher$!
The Sarbanes-Oxley thing is no bull. I did work for Apple on something that was constrained by the very same issue. They are definitely concerned internally of possibility that "adding features to a completed product" may expose them to SOX liability. I know it sounds utterly ridiculous, but this is the legal climate we're in, or at least Apple's interpretation thereof. It's not about wanting to deliberately nickel-and-dime people.
Apple has had some really, really lousy legal advisors for the past...what...5 or 6 years? Remember in the keynote Steve took special care to emphasize the 200 patented features in the iPhone. An unusual thing to note in an Apple product introduction. They've been burned by poor legal advice and poor patent advice. Maybe Steve is growing up and finally recognizing (way too late, IMO) the business impact ignorance of these laws has had on Apple.
I am concerned about future attempts by Apple to release updated operating systems which cripple hardware features on systems which are supposedly "supported" by that OS. I don't want to see another Beige G3 controversy in the future. Are there any laws regarding this?
I think that, by charging for the upgrade, Apple is trying to avoid this very thing. 802.11n was never officially supported by the C2D laptops, even though the chipset was present. Now that it is, it's a new "feature" that is being supported by the OS. To anantksundaram's comment, the materiality of such an upgrade could certainly be disputed in court, so I think Apple's just playing it safe. By charging for the upgrade, they are (more or less) disassociating it from the "complete" Tiger product.
Core 2 Duo-based Mac owners who want to unlock next-generation 802.11n wireless technologies hidden inside their computers will first have to fork a few bucks over to Apple, AppleInsider has confirmed.
That's unless they plan to plunk down $179 for the company's forthcoming 802.11n-enabled AirPort Extreme Base Station, with which the unlocking fee (and 802.11n software enabler patch) are reportedly included.
You see, Apple for the last several months has quietly been shipping the majority of its Core 2 Duo systems with inactive support for the draft 802.11n specification, an emerging wireless standard that promises fivefold speed increases over previous-generation 802.11g products.
Apple last week confirmed the move, saying Mac systems currently shipping with hidden 802.11n capabilities included the Core 2 Duo MacBook, Core 2 Duo MacBook Pro, Mac Pro with AirPort Extreme, and the Core 2 Duo iMac (with the exception of the 17-inch 1.83GHz model).
The company said that it plans to offer an "AirPort Extreme 802.11n Enabler 1.0" patch next month when it begins shipping its new AirPort Extreme Base Station, which will activate the technology.
"Most new Mac computers ship with built-in 802.11n wireless support that can be easily enabled with the installation of enabler software included with new AirPort Extreme wireless base station," Apple wrote on its website.
What the company did not say is that Core 2 Duo Mac owners who want to unlock 802.11n capabilities for use with third party wireless solutions will have to pay a small $4.99 fee before downloading the 802.11n enabler patch.
Reasons behind the move -- and such a small obnoxious fee -- are not necessarily clear at the moment. However, iLounge's Jeremy Horwitz is offering an explanation from some Apple representatives present at last week's Macworld Expo.
According to the editor, the fee stems from a law called the Sarbanes-Oxley Act, which supposedly prohibits Apple from giving away an unadvertised new feature of an already sold product without enduring some onerous accounting measures.
"Because of the Act, the company believes that if it sells a product, then later adds a feature to that product, it can be held liable for improper accounting if it recognizes revenue from the product at the time of sale, given that it hasn?t finished delivering the product at that point," he wrote.
So if you're a Core 2 Duo Mac owner that wants 802.11n without having to purchase a new AirPort Extreme, you may want to hold onto that 5-spot.
I keep reminding myself we don't KNOW this is true yet. I understand that Apple is enmeshed in legal troubles right now, but this $5 fee seems ludicrous and overcautious.
I also don't know how it counts as a new functionality when you could already access it by running Windows drivers on Boot Camp.
Hopefully this rumor is false. Otherwise, this seems really shady.
I'm still going to vote false - it is still a rumour, and I'm sure Apple would find a way around this, or we would have an official statement about it by now.
Maybe S-O has really changed things, but it does seem strange.
Have you noticed that most times when you buy some hardware there is a notice to the effect that the company reserves the right to improve the product without making that improvement available to current owners of the product?
I wonder how many times a software update will do that.
Now, the other question is whether this only involves hardware. I wouldn't think so. Quicktime Pro comes to mind, though we do pay for that.
But, what happens if you buy software that works with your current OS, but can only access features in the program when you upgrade to the new OS?
For example, if a company allowed one to use Spotlight. If you had 10.3 installed, that feature wouldn't work. But when you upgraded to 10.4, it would. how would S-O cover that, assuming that it says anything about it at all? How would that company book the revenue of their program given that. Or would it only be affected if they had the OS and the program? Would they need to have control over both?
And, my assumption in this post is to give Apple the benefit of the doubt, for the moment, in this.
Maybe S-O has really changed things, but it does seem strange.
Have you noticed that most times when you buy some hardware there is a notice to the effect that the company reserves the right to improve the product without making that improvement available to current owners of the product?
I wonder how many times a software update will do that.
Now, the other question is whether this only involves hardware. I wouldn't think so. Quicktime Pro comes to mind, though we do pay for that.
But, what happens if you buy software that works with your current OS, but can only access features in the program when you upgrade to the new OS?
For example, if a company allowed one to use Spotlight. If you had 10.3 installed, that feature wouldn't work. But when you upgraded to 10.4, it would. how would S-O cover that, assuming that it says anything about it at all? How would that company book the revenue of their program given that. Or would it only be affected if they had the OS and the program? Would they need to have control over both?
And, my assumption in this post is to give Apple the benefit of the doubt, for the moment, in this.
I find the repeated references to Sarbox as the proximate reason completely unpersuasive -- just as it has nothing to with the options backdating scandal, it has nothing to do with revenue recognition issues.
Lawsuit avoidance? Possibily. Stupidity? Less likely. A few extra bucks? Even less likely. But if any of these were reasons, then we had better anticipate a ton of such weird surprises, going forward.
People are welcome to keep saying it is attributable it to Sarbox -- there's no law against it! -- but that does not make it so.
I find the repeated references to Sarbox as the proximate reason completely unpersuasive -- just as it has nothing to with the options backdating scandal, it has nothing to do with revenue recognition issues.
Lawsuit avoidance? Possibily. Stupidity? Less likely. A few extra bucks? Even less likely. But if any of these were reasons, then we had better anticipate a ton of such weird surprises, going forward.
People are welcome to keep saying it is attributable it to Sarbox -- there's no law against it! -- but that does not make it so.
Your response has nothing to do with my post. Please post something like that separately.
What we are doing here, in this thread, is, other than to abuse Apple, or praise it, to see what the justification COULD be IF S-O is affecting matters like these.
It's a thought process about the logic. I didn't say that S-O WAS the cause. I said that IF it were the cause.
Your response has nothing to do with my post. Please post something like that separately.
What we are doing here, in this thread, is, other than to abuse Apple, or praise it, to see what the justification COULD be IF S-O is affecting matters like these.
It's a thought process about the logic. I didn't say that S-O WAS the cause. I said that IF it were the cause.
Fair point -- I shouldn't have replied to your post specifically, and should have separated it.
So let me make it clear I was referring to the "repeated" references to Sarbox in all the posts above, and in the original story that led to this thread (yours, it just so happened, was the nearest one mentioning "S-O" when I logged on).
This is a wonderful idea ... but for an accountant, it's legally impossible to enter it as $0 on the balance sheet. The freeware has to cost Apple something to develop, debug and distribute it. It has to show up as an expense (negative number) somewhere on the balance sheet. Without going into the accounting nitty gritty, that negative number could, for a zealous auditor or lawsuit lover, put Apple's previous financial statements into question. That would be bad for Apple.
How then, and I ask this in all seriousness , can Apple give anything away without it being advertised in the specs of something? they add widgets to OSX in FREE service fixes, they add volume control, new playback capability and such to iPod with iPod Updater, they give free OSX updates to those who purchase the system after the launch date (note that their box does not list the new OS as a feature)
How then, and I ask this in all seriousness , can Apple give anything away without it being advertised in the specs of something? they add widgets to OSX in FREE service fixes, they add volume control, new playback capability and such to iPod with iPod Updater, they give free OSX updates to those who purchase the system after the launch date (note that their box does not list the new OS as a feature)
That's the problem, ain't it? Where is the consistancy? The only reason for that that I can think of (and see my last two posts as well as the gentleman who commented), is that the earlier "updates" came before accounting thought of this. Weak? Perhaps.
We aren't going to solve this here. I'm eagerly awaiting some real expert comments in the media.
Comments
I have checked with an accounting expert -- and this guy knows what he is talking about. Here's the scoop.
1) Apple's logic (if it was, indeed, their logic -- sounded like it was some unnamed outside accountant quoted in the story) is bull. (The actual words my friend used were: "it is a rationalization without substance.")
2) If a product or service is "substantially complete" when it is sold, all the revenue can be recognized up front. When you sell a $2000 product, a $5 add-on is basically "not material." Materiality is the crucial issue.
3) Sar-box (as I suspected) has little to with this -- it has very few, if any, requirements on the content of accounting rules, but rather, focuses on the process of adopting and impementing these rules.
So there you have it. Apple's $5 charge is silly.
Your accounting expert is absoutely correct. Apple's charge is silly on its face. But that's not the crucial issue. The crucial issue is what he states in point #3: "...the process of adopting and impementing these rules."
Apple could argue the point made in #2 ... and most likely win in court against any possible earnings-statement lawsuit. But at what legal cost? And what would just the announcement of a lawsuit do to Apple's stock price? And if the stock price dropped, couldn't a shareholder then sue Apple because "the stock price wouldn't have dropped if Apple took the MOST CONSERVATIVE route when it came to its accounting practices?"
Remember, this is a company still in the midst of an options brouhaha. The last thing it needs is a lawsuit because of ANY questionable accounting practice, defendible or not, no matter how small or insignificant it may be.
Bottom line: This is not about accounting. This is about lawsuit protection.
This is a wonderful idea ... but for an accountant, it's legally impossible to enter it as $0 on the balance sheet. The freeware has to cost Apple something to develop, debug and distribute it. It has to show up as an expense (negative number) somewhere on the balance sheet. Without going into the accounting nitty gritty, that negative number could, for a zealous auditor or lawsuit lover, put Apple's previous financial statements into question. That would be bad for Apple.
No accounting violation at all
This is more accounting-gone-wild stuff.
1) Companies CAN and DO give lots of stuff away for free -- heard of Netscape's original business model? Also, a number of things were (and continue to be) registered as being worth $0 in financial statements -- remember stock options until this year?
2) Companies CAN and DO offer all types of upgrades/goodies/freebies to customer subsets depending on the tier of customer or lifetime value of customer etc. Consider the example of Amex. A Platimun Card member gets free airport lounge access in three airlines, while the Gold card gets none; the Centurion card member gets access to EVERY major airline lounge worldwide but the Platinum card gets only three.
3) You are basically implying that accountants can start to interfere with a company's business strategy (e.g., the way it builds its customer loyalty) -- I am sure you all want to, but you'd be booted out in a second for that kind of arrogance.
It seems to me, though, that Leopard could include activation of 802.11n, so this $5 thing should eventually be a moot point.
This is more accounting-gone-wild stuff.
You are basically implying that accountants can start to interfere with a company's business strategy (e.g., the way it builds its customer loyalty) -- I am sure you all want to, but you'd be booted out in a second for that kind of arrogance.
Yes, completely Accounting Gone Wild. Geez, imagine that video...
This is off-topic, but I had to respond that when accountants STOP interfering with a company's business strategy ... you get Enron. So please don't hate on the legit number-kruncher$!
The Sarbanes-Oxley thing is no bull. I did work for Apple on something that was constrained by the very same issue. They are definitely concerned internally of possibility that "adding features to a completed product" may expose them to SOX liability. I know it sounds utterly ridiculous, but this is the legal climate we're in, or at least Apple's interpretation thereof. It's not about wanting to deliberately nickel-and-dime people.
Apple has had some really, really lousy legal advisors for the past...what...5 or 6 years? Remember in the keynote Steve took special care to emphasize the 200 patented features in the iPhone. An unusual thing to note in an Apple product introduction. They've been burned by poor legal advice and poor patent advice. Maybe Steve is growing up and finally recognizing (way too late, IMO) the business impact ignorance of these laws has had on Apple.
I am concerned about future attempts by Apple to release updated operating systems which cripple hardware features on systems which are supposedly "supported" by that OS. I don't want to see another Beige G3 controversy in the future. Are there any laws regarding this?
I think that, by charging for the upgrade, Apple is trying to avoid this very thing. 802.11n was never officially supported by the C2D laptops, even though the chipset was present. Now that it is, it's a new "feature" that is being supported by the OS. To anantksundaram's comment, the materiality of such an upgrade could certainly be disputed in court, so I think Apple's just playing it safe. By charging for the upgrade, they are (more or less) disassociating it from the "complete" Tiger product.
Core 2 Duo-based Mac owners who want to unlock next-generation 802.11n wireless technologies hidden inside their computers will first have to fork a few bucks over to Apple, AppleInsider has confirmed.
That's unless they plan to plunk down $179 for the company's forthcoming 802.11n-enabled AirPort Extreme Base Station, with which the unlocking fee (and 802.11n software enabler patch) are reportedly included.
You see, Apple for the last several months has quietly been shipping the majority of its Core 2 Duo systems with inactive support for the draft 802.11n specification, an emerging wireless standard that promises fivefold speed increases over previous-generation 802.11g products.
Apple last week confirmed the move, saying Mac systems currently shipping with hidden 802.11n capabilities included the Core 2 Duo MacBook, Core 2 Duo MacBook Pro, Mac Pro with AirPort Extreme, and the Core 2 Duo iMac (with the exception of the 17-inch 1.83GHz model).
The company said that it plans to offer an "AirPort Extreme 802.11n Enabler 1.0" patch next month when it begins shipping its new AirPort Extreme Base Station, which will activate the technology.
"Most new Mac computers ship with built-in 802.11n wireless support that can be easily enabled with the installation of enabler software included with new AirPort Extreme wireless base station," Apple wrote on its website.
What the company did not say is that Core 2 Duo Mac owners who want to unlock 802.11n capabilities for use with third party wireless solutions will have to pay a small $4.99 fee before downloading the 802.11n enabler patch.
Reasons behind the move -- and such a small obnoxious fee -- are not necessarily clear at the moment. However, iLounge's Jeremy Horwitz is offering an explanation from some Apple representatives present at last week's Macworld Expo.
According to the editor, the fee stems from a law called the Sarbanes-Oxley Act, which supposedly prohibits Apple from giving away an unadvertised new feature of an already sold product without enduring some onerous accounting measures.
"Because of the Act, the company believes that if it sells a product, then later adds a feature to that product, it can be held liable for improper accounting if it recognizes revenue from the product at the time of sale, given that it hasn?t finished delivering the product at that point," he wrote.
So if you're a Core 2 Duo Mac owner that wants 802.11n without having to purchase a new AirPort Extreme, you may want to hold onto that 5-spot.
[ View this article at AppleInsider.com ]
How can I tell if the macbook pro sitting on the shelf has the new 'N' hardware ready to be unlocked?
Buying leopard better unlock that shit.
How can I tell if the macbook pro sitting on the shelf has the new 'N' hardware ready to be unlocked?
Look here: http://www.apple.com/wireless/80211/
Apple lists the following models:
- iMac with Intel Core 2 Duo (except 17-inch, 1.83GHz iMac)
- MacBook with Intel Core 2 Duo
- MacBook Pro with Intel Core 2 Duo
- Mac Pro with AirPort Extreme card option
Anything else doesn't have the 'n' hardware.I also don't know how it counts as a new functionality when you could already access it by running Windows drivers on Boot Camp.
Hopefully this rumor is false. Otherwise, this seems really shady.
http://www.macrumors.com/pages/2007/...15102215.shtml
Update: MacRumors has received confirmation that Apple will be releasing Airport Extreme 802.11n Enabler 1.0 for US $4.99 in February.
Have you noticed that most times when you buy some hardware there is a notice to the effect that the company reserves the right to improve the product without making that improvement available to current owners of the product?
I wonder how many times a software update will do that.
Now, the other question is whether this only involves hardware. I wouldn't think so. Quicktime Pro comes to mind, though we do pay for that.
But, what happens if you buy software that works with your current OS, but can only access features in the program when you upgrade to the new OS?
For example, if a company allowed one to use Spotlight. If you had 10.3 installed, that feature wouldn't work. But when you upgraded to 10.4, it would. how would S-O cover that, assuming that it says anything about it at all? How would that company book the revenue of their program given that. Or would it only be affected if they had the OS and the program? Would they need to have control over both?
And, my assumption in this post is to give Apple the benefit of the doubt, for the moment, in this.
Maybe S-O has really changed things, but it does seem strange.
Have you noticed that most times when you buy some hardware there is a notice to the effect that the company reserves the right to improve the product without making that improvement available to current owners of the product?
I wonder how many times a software update will do that.
Now, the other question is whether this only involves hardware. I wouldn't think so. Quicktime Pro comes to mind, though we do pay for that.
But, what happens if you buy software that works with your current OS, but can only access features in the program when you upgrade to the new OS?
For example, if a company allowed one to use Spotlight. If you had 10.3 installed, that feature wouldn't work. But when you upgraded to 10.4, it would. how would S-O cover that, assuming that it says anything about it at all? How would that company book the revenue of their program given that. Or would it only be affected if they had the OS and the program? Would they need to have control over both?
And, my assumption in this post is to give Apple the benefit of the doubt, for the moment, in this.
I find the repeated references to Sarbox as the proximate reason completely unpersuasive -- just as it has nothing to with the options backdating scandal, it has nothing to do with revenue recognition issues.
Lawsuit avoidance? Possibily. Stupidity? Less likely. A few extra bucks? Even less likely. But if any of these were reasons, then we had better anticipate a ton of such weird surprises, going forward.
People are welcome to keep saying it is attributable it to Sarbox -- there's no law against it! -- but that does not make it so.
I find the repeated references to Sarbox as the proximate reason completely unpersuasive -- just as it has nothing to with the options backdating scandal, it has nothing to do with revenue recognition issues.
Lawsuit avoidance? Possibily. Stupidity? Less likely. A few extra bucks? Even less likely. But if any of these were reasons, then we had better anticipate a ton of such weird surprises, going forward.
People are welcome to keep saying it is attributable it to Sarbox -- there's no law against it! -- but that does not make it so.
Your response has nothing to do with my post. Please post something like that separately.
What we are doing here, in this thread, is, other than to abuse Apple, or praise it, to see what the justification COULD be IF S-O is affecting matters like these.
It's a thought process about the logic. I didn't say that S-O WAS the cause. I said that IF it were the cause.
Your response has nothing to do with my post. Please post something like that separately.
What we are doing here, in this thread, is, other than to abuse Apple, or praise it, to see what the justification COULD be IF S-O is affecting matters like these.
It's a thought process about the logic. I didn't say that S-O WAS the cause. I said that IF it were the cause.
Fair point -- I shouldn't have replied to your post specifically, and should have separated it.
So let me make it clear I was referring to the "repeated" references to Sarbox in all the posts above, and in the original story that led to this thread (yours, it just so happened, was the nearest one mentioning "S-O" when I logged on).
This is a wonderful idea ... but for an accountant, it's legally impossible to enter it as $0 on the balance sheet. The freeware has to cost Apple something to develop, debug and distribute it. It has to show up as an expense (negative number) somewhere on the balance sheet. Without going into the accounting nitty gritty, that negative number could, for a zealous auditor or lawsuit lover, put Apple's previous financial statements into question. That would be bad for Apple.
How then, and I ask this in all seriousness , can Apple give anything away without it being advertised in the specs of something? they add widgets to OSX in FREE service fixes, they add volume control, new playback capability and such to iPod with iPod Updater, they give free OSX updates to those who purchase the system after the launch date (note that their box does not list the new OS as a feature)
How then, and I ask this in all seriousness , can Apple give anything away without it being advertised in the specs of something? they add widgets to OSX in FREE service fixes, they add volume control, new playback capability and such to iPod with iPod Updater, they give free OSX updates to those who purchase the system after the launch date (note that their box does not list the new OS as a feature)
That's the problem, ain't it? Where is the consistancy? The only reason for that that I can think of (and see my last two posts as well as the gentleman who commented), is that the earlier "updates" came before accounting thought of this. Weak? Perhaps.
We aren't going to solve this here. I'm eagerly awaiting some real expert comments in the media.
Are Dell, HP, IBM or Lenovo doing the same as Apple?
Aren't we getting ahead of ourselves?
Aren't we getting ahead of ourselves?
Is this a response to your own post?