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Accounting Curveball Changing High-Tech Revenue Figures

Now that Apple Inc. (AAPL) has reported shockingly high earnings thanks to an accounting change, expect other high-tech companies to start doing the same.

Earlier this week, Apple said its fourth-quarter net income totaled $3.37 billion, a 50 percent jump from the year-ago period. The number stunned analysts and observers, until they figured out Apple had taken advantage of a recent Financial Accounting Standards Board (FASB) change that lets companies revamp how they recognize revenue. In essence, high-tech firms can record hardware-software sales all at once, instead of spreading them out over time.

The accounting shift holds some implications. First, it magnifies a quarter’s results, which is positive for the short-term. But it also makes comparisons to past quarters difficult. That’s especially true when companies apply the change to past quarters – and Apple has done just that, reconciling the past two years’ results, according to reports.

Writer Chris Obrien at SiliconBeat points out the impact of the tweaking: For Apple, the alterations bumped first-quarter 2009 revenue from $10.2 billion, under the old accounting standards, to $11.9 billion under the new. Obrien adds it doesn’t look as though Apple disclosed what fourth-quarter 2009 sales would have been under the old rule.

Overall, expect high-tech sales numbers to be bumpy from quarter to quarter. Also, observers say, expect companies including Cisco Systems Inc. (CSCO) and TiVo (TIVO) to follow Apple’s accounting-change lead, and they have until 2011 to do so.


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