Shares of Apple (AAPL) and Research In Motion
(RIMM) are rising in pre-market trading, partly because a new
accounting rule that has been adopted by the Financial Accounting
Standards Board (FASB) favors the companies.
Without getting too much into it here, companies like Apple, which
offer free software and services upgrades for devices like the iPhone,
had to spread out revenue on sales of those devices over eight
quarters, meaning Apple for instance, only recognized an eight of the
actual product price in the quarter the product was sold and the
remaining seven eights spread out over the next seven quarters. With
the news rules, the percentage to be recognized will be determined on a
case-by-case basis.
In short, companies like Apple will be able to realize a bigger
portion of their for certain devices upfront, which of course raises
their earnings.
Analysts are estimating that with the news rules, Apple should see its annual earnings jump over 40% with the new rules.
Apple is up $2.21 to $187.71, while Research In Motion is up $1.50 to $87.27.
