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iPod touch fee could go bye-bye

Chris Foresman over at Ars Technica has an interesting pronouncement: A rule governed by the Financial Accounting Standards Board, that's been heavily lobbied for by Apple and other electronics companies, may be enough to lift the charge that iPod touch owners have had to pay for updates of significant features to their devices. It's complicated, but it all has to do with "subscription accounting" -- devices that gain "significant new functionality" after their sale, like the iPhone, have to be reported over a series of years rather than all at the same time (presumably because the revenues associated with the product were the result of a series of updates, not just one lump sum).

For the iPhone, it's fine -- they have subscription charges associated with them over two years anyway. But the iPod touch is different -- because Apple doesn't want to report the sales of those devices over a period of time, they've had to charge minimum fees for updates -- the $10 (and more recently, $5) that iPod touch owners have paid for the firmware updates. But if the new rule goes in (it still requires FASB approval), then Apple would be able to report sales of the iPod touch all together without having to worry about charging for updates, as well as the dual GAAP and non-GAAP reporting we've heard on their conference calls.

Plus, as Foresman says, it would help Apple's stock price (seeing all of the iPhone's sales at once would boost investor confidence), and it would help developers who are asking all users of both the iPhone and iPod touch to update right away -- they wouldn't have to wait for iPod touch owners to find a few bucks in their couch. With the weight of Apple behind this one, we can probably expect to see the rule approved (even if they have to make some concessions). And so while iPod touch owners will probably have to still keep waiting for a camera, they at least won't have to pay for more software updates.

Chris Foresman over at Ars Technica has an interesting pronouncement: A rule governed by the Financial Accounting Standards Board, that's...
 

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vw

I think a better question to ask is why wasnt A2DP in V2 of the 2G touch firmware? Boo Apple :p

December 22 2009 at 6:39 PM Report abuse rate up rate down Reply
Neil Anderson

Go Nicole!

September 15 2009 at 10:47 PM Report abuse rate up rate down Reply
Ted Cranmore

While Apple now could choose to not charge without impacting the way sales are recogized, given the fact that this turkey has been flying without issue for a couple of years now I see little reason to change now. 20 million iPod Touch users today, $10 per upgrade and people have been willing to pay it for major upgrades. So, they are to stop taking in a potential of 200 million just because the option to do so has less implications? Gee....I think not.

September 15 2009 at 10:24 PM Report abuse rate up rate down Reply
Nicole

You can dig up the court documents yourself if you have the time, but just for an idea: http://en.wikipedia.org/wiki/Microsoft_litigation.

Microsoft does some things very well, namely server os's and visual studio are personal favorites. However, Microsoft has never been a real competitor in the media market; their approach to it has always been too hap-hazard.

September 15 2009 at 3:36 PM Report abuse rate up rate down Reply
Nicole

Microsoft rarely does things in accordance with law.

September 15 2009 at 1:40 PM Report abuse rate up rate down Reply
Jason

To be honest, I'm a little tired of these articles. The fact is, Apple doesn't have to charge ANYTHING for its updates. Accounting never "forces" a company to charge anything. The accounting DOES force Apple to recognize revenue a certain way on its financial statements, but it does not force Apple to charge for updates.

In fact Lynn Turner, the former chief accountant of the Securities and Exchange Commission said, "[generally accepted accounting principles] doesn't require you to charge squat."

She adds, "You charge whatever you want. GAAP doesn't even remotely address whether or not you charge for a significant functionality change. GAAP establishes what the proper accounting is, based on what you did or didn't charge for it."

Being an accountant myself I tend to agree with the former chief accountant of the SEC.

September 15 2009 at 12:38 PM Report abuse rate up rate down Reply
psvt

Sony may use a different interpretation of the accounting rules. They might run the risk that the SEC asks them for a financial restatement (i.e. they can't recognize the revenue of the PSP until , say, 2 years after the initial sale). But that's unlikely.

It really comes down to how anal your finance dept is.

September 15 2009 at 12:36 PM Report abuse rate up rate down Reply
pax copia

I call BS on this article.

Sony has given firmware and software updates that are full of new features (web browser, rss, internet radio, so on and so forth) over the years for their PSP.


September 15 2009 at 12:27 PM Report abuse rate up rate down Reply
Quinn Taylor

So instead of paying for a software update, you can just buy an entirely different device with single-digit marketshare (to be incredibly generous to ~1%). That's a real winner... Have you considered that Microsoft is bound by the same rules?

September 15 2009 at 12:27 PM Report abuse rate up rate down Reply
Tony Martin

"Too little too late, Zune HD is here."

Actually, it isn't. Only the hardware is. If you want Facebook and Twitter, wait until the end of the year, same with games. If you want an app store, it could be a year away. Who in their right mind would buy a device only half done?

September 15 2009 at 12:22 PM Report abuse rate up rate down Reply
1 reply to Tony Martin's comment
John Benoit

"Who in their right mind would buy a device only half done?"

hmm, I seem to remember buying my iPod touch 1st gen at launch with even less features than the zune HD. Granted, I now have a 3GS that does a whole lot more, but shouldn't we give Microsoft the same chance to improve their device? The hardware is there, so let's give them the same patience we've showed apple for the past few years.

September 15 2009 at 4:46 PM Report abuse rate up rate down Reply
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