According to case Accounting for the iPhone at Apple Inc.

1. Compared to the typical point-of-sale accounting method, what are likely effects on income statement, balance sheet, and statement of cash flow of Apples choice to use a subscription method for revenue recognition for its iPhone? Also discuss advantages and disadvantages of subscription accounting.

2. Could Apple have structured sales of Apple TV and the iPhone to avoid subscription accounting? If so, how?

3. As an analyst evaluating Apples success, how would you compare Apples sales and gross profit across time and to other companies?

4. Which number, as reported or non-GAAP, do you think better captures the underlying economics of selling an iPhone?

5. Should Apple lobby the FASB to change the revenue recognition rules for smartphones? 6. Does it matter if FASB adopts a new rule for revenue recognition related to smartphones?

7. Discuss the role of pro forma disclosures such as the ones provided by Apple in capital markets. Also discuss the trade-offs (faced by regulators) between granting managers flexibility so as to reflect the economic reality of innovative products and minimizing the room for self- serving manipulation of financial disclosures.