After changing the accounting policy, where the Apple Company recognizes the revenue just after selling the Smartphone, there will be a significant change in the company financial statements (Blodget 2). The change in the revenue recognition policy will affect the stock, profits and the cash flow of the company. Below is the analysis of the impact of the change in the revenue recognition policy.After changing the policy, the stock price of the company will go up. Revenues of the company will look up front. For instance, during 2008 financial year, the company recorded sales worth $8. 4 billion but in reality, the sales of the company were $9.74 (Blodget 2). If the company had changed the revenue policy before that time, it could have had high revenues. High revenues will result in the increase in the profitability of the company. As a norm every investor wishes to invest in a profitable company, so many investors will be willing to purchase the share of the company. High demand for shares will hike the market price of the securities.
The change in the policy will also make Apple Company to have a high cash earning power more apparent to a broader base. As a result, of recording sales, as they take place, the company will have huge cash reserves in the bank account. Huge cash reserves will enable the company to meet its daily obligations. Huge cash reserves will also motivate the investors of the company because they will recognize the massive cash earning by the iPhone (Leone 3).
In conclusion, the change in revenue recognition will have impacts on the Apple financial statements. The change will make the company share prices to go up as a result in the increase in the profitability of the company. The company cash reserves will also increase due to the recognition of revenue at the sale point. High cash revenue will motivate the shareholders of the company.
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