Stock Analysis on Net
Stock Analysis on Net
Microsoft Excel LibreOffice Calc

Apple Inc. (NASDAQ:AAPL)

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Analysis of Revenues

Advanced level

Accounting Policy on Revenue Recognition

Net sales consist of revenue from the sale of iPhone, Mac, iPad, Services and other products. Apple recognizes revenue at the amount to which it expects to be entitled when control of the products or services is transferred to its customers. Control is generally transferred when Apple has a present right to payment and title and the significant risks and rewards of ownership of products or services are transferred to its customers. For most of Apple’s Products net sales, control transfers when products are shipped. For Apple’s Services net sales, control transfers over time as services are delivered. Payment for Products and Services net sales is collected within a short period following transfer of control or commencement of delivery of services, as applicable.

Apple records reductions to Products net sales related to future product returns, price protection and other customer incentive programs based on Apple’s expectations and historical experience.

For arrangements with multiple performance obligations, which represent promises within an arrangement that are capable of being distinct, Apple allocates revenue to all distinct performance obligations based on their relative stand-alone selling prices (“SSPs”). When available, Apple uses observable prices to determine SSPs. When observable prices are not available, SSPs are established that reflect Apple’s best estimates of what the selling prices of the performance obligations would be if they were sold regularly on a stand-alone basis. Apple’s process for estimating SSPs without observable prices considers multiple factors that may vary depending upon the unique facts and circumstances related to each performance obligation including, where applicable, prices charged by Apple for similar offerings, market trends in the pricing for similar offerings, product-specific business objectives and the estimated cost to provide the performance obligation.

Apple has identified up to three performance obligations regularly included in arrangements involving the sale of iPhone, Mac, iPad and certain other products. The first performance obligation, which represents the substantial portion of the allocated sales price, is the hardware and bundled software delivered at the time of sale. The second performance obligation is the right to receive certain product-related bundled services, which include iCloud, Siri and Maps. The third performance obligation is the right to receive, on a when-and-if-available basis, future unspecified software upgrades relating to the software bundled with each device. Apple allocates revenue and any related discounts to these performance obligations based on their relative SSPs. Because Apple lacks observable prices for the undelivered performance obligations, the allocation of revenue is based on Apple’s estimated SSPs. Revenue allocated to the delivered hardware and bundled software is recognized when control has transferred to the customer, which generally occurs when the product is shipped. Revenue allocated to the product-related bundled services and unspecified software upgrade rights is deferred and recognized on a straight-line basis over the estimated period they are expected to be provided. Cost of sales related to delivered hardware and bundled software, including estimated warranty costs, are recognized at the time of sale. Costs incurred to provide product-related bundled services and unspecified software upgrade rights are recognized as cost of sales as incurred.

For certain long-term service arrangements, Apple has performance obligations for services it has not yet delivered. For these arrangements, Apple does not have a right to bill for the undelivered services. Apple has determined that any unbilled consideration relates entirely to the value of the undelivered services. Accordingly, Apple has not recognized revenue, and has elected not to disclose amounts, related to these undelivered services.

For the sale of third-party products where Apple obtains control of the product before transferring it to the customer, Apple recognizes revenue based on the gross amount billed to customers. Apple considers multiple factors when determining whether it obtains control of third-party products including, but not limited to, evaluating if it can establish the price of the product, retains inventory risk for tangible products or has the responsibility for ensuring acceptability of the product. For third-party applications sold through the App Store, Mac App Store, TV App Store and Watch App Store and certain digital content sold through Apple’s other digital content stores, Apple does not obtain control of the product before transferring it to the customer. Therefore, Apple accounts for such sales on a net basis by recognizing in Services net sales only the commission it retains.

Apple has elected to record revenue net of taxes collected from customers that are remitted to governmental authorities, with the collected taxes recorded within other current liabilities until remitted to the relevant government authority.

Source: 10-K (filing date: 2019-10-31).

Revenues as Reported

Apple Inc., Income Statement, Revenues

US$ in millions

Microsoft Excel LibreOffice Calc
12 months ended: Sep 28, 2019 Sep 29, 2018 Sep 30, 2017 Sep 24, 2016 Sep 26, 2015 Sep 27, 2014
Wearables, Home and Accessories
Net sales

Based on: 10-K (filing date: 2019-10-31), 10-K (filing date: 2018-11-05), 10-K (filing date: 2017-11-03), 10-K (filing date: 2016-10-26), 10-K (filing date: 2015-10-28), 10-K (filing date: 2014-10-27).

Item Description The company
Net sales Amount of revenue recognized from goods sold, services rendered, insurance premiums, or other activities that constitute an earning process. Includes, but is not limited to, investment and interest income before deduction of interest expense when recognized as a component of revenue, and sales and trading gain (loss). Apple Inc.’s net sales increased from 2017 to 2018 but then slightly decreased from 2018 to 2019.