Accounting Rule Change May Help Tech Companies
The Financial Accounting Standards Board (FASB) has approved a rule change that could help technology companies by letting them record revenues earlier from products that combine hardware and software, as Apple's iPhone and Palm's Pre smartphones. The rule goes into effect in 2011, but companies can adopt it earlier - which they are likely to do, since they had pushed for the rule change, contending that reporting revenue from sales over time does not accurately portray how such products are used. Under existing FASB rules, revenues were booked over several quarters - as much as two years. Analysts expect that the accounting change may make some companies more attractive investments. Apple, which had endorsed the FASB action saying it would better reflect "the underlying economics of the transactions," may be the company most impacted by the rule change. Barclays Capital analyst Ben Reitzes, in a Bloomberg interview, said the change will help Apple's price-to-earnings ratio and "that could look attractive to retail investors."