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Apple non-GAAP Accounting Principle Essay

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Updated: Jul 21st, 2021

Apple Inc., along with other companies like Cisco and other companies show their earnings in non-GAAP (generally accepted accounting principles) figures, as they are believed to reflect their earnings better.

Apple undertook a non-GAAP accounting principle in the first quarter of 2010 (Adhikari, 2010). Non-GAP financial measures that Apple included in its reports were “adjusted sales,” “adjusted cost of sales,” “adjusted gross margin,” etc. Apple adopted these measures in order to reverse the effect of subscription accounting (Apple Inc., 2009).

Apple demonstrated that the non-GAAP measures were used only for the operational results. The accounting system showed an increased sales of products of the companies like the iPhone and Apple TV. The overall GAAP-revenue of Apple was $8.3 billion in 2009 while the non-GAAP revenue showed $9.7 billion (Madway, 2009). It is believed that the non-GAAP results showed a better performance of the company. This essay will discuss the effect the non-GAAP accounting practice had on the different departments of the company.

The new non-GAAP accounting practice that Apple followed required the company to account for all the revenue and cost associated with the production of iPhone and Apple TVs after the products are sold. The previous accounting practice constrained Apple to recognize the product revenue over 2 years.

Thus, the practice essentially reduced the profit or revenue earned by the company as it was spread across a longer period. As observed in 2009, Apple began selling its iPhone 3GS which achieved a significant amount of 5.2 million. Therefore, using a non-GAAP accounting measure, Apple was able to account for the whole sale in 2009.

This is believed to affect the company as a whole and the sales and finance department as the whole profit and revenue realized during the period is accounted for using the non-GAAP measure. Therefore, this measure helped Apple to compare its sales with that of the competitors. The measure also provided a meaningful measure of the growth of Apple. Further it provides a full insight into the company’s performance for the investors.

As these non-GAAP measures are inconsistent with GAAP accounting principles as the former do not show deferment of products or revenue for later period, therefore, it does not include the company’s intention of including unspecified costs into the product’s development in the future period. Therefore, the department that may be affected due to this measure is the research and development team, as their costs are not taken into account.

Further, the non-GAAP measure does not reflect the complete cost of sale of the product during the particular period, therefore, affecting the sales accounting. When the quarterly sales of 2007 are compared based on old (GAAP) and new accounting system (non-GAAP), it is observed that there is an increase in total operating and total Apple revenue following non-GAAP method than the old accounting system (Apple Inc., 2008).

The departure of the conventional accounting practice in accordance to GAAP as followed by most companies actually helped Apple in showing the real figures of sales and revenue of their products instead of showing the non-GAAP methods.

The departments that were mostly affected due to the change in the accounting system were the department related to iPhone and Apple TV as their sales and revenue figures showed higher returns. By adopting this unusual accounting principle, Apple increased their revenue performance and therefore shareholder satisfaction.


Adhikari, R. (2010). Commerce Times. Web.

. (2009). Apple Reports Second Quarter Results. Apple. Web.

Apple Inc. (2008). Revised Quarterly Summary Data. Apple Inc. Web.

Madway, G. (2009). . Web.

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"Apple non-GAAP Accounting Principle." IvyPanda, 21 July 2021, ivypanda.com/essays/gaap/.

1. IvyPanda. "Apple non-GAAP Accounting Principle." July 21, 2021. https://ivypanda.com/essays/gaap/.


IvyPanda. "Apple non-GAAP Accounting Principle." July 21, 2021. https://ivypanda.com/essays/gaap/.


IvyPanda. 2021. "Apple non-GAAP Accounting Principle." July 21, 2021. https://ivypanda.com/essays/gaap/.


IvyPanda. (2021) 'Apple non-GAAP Accounting Principle'. 21 July.

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