Accounting for iPhone, Apple TV's future

New accounting method aims to prevent a repeat of the backlash over Apple's $1.99 fee for activating the 802.11n chip in Macbook Pros.
Written by Tom Krazit, Contributor
Apple is paving the way for free enhancements to the iPhone and Apple TV by making its accounting methods clear from the start.

The company will gradually recognize a portion of the revenue from each sale of those products as new features are delivered, Chief Financial Officer Peter Oppenheimer said Wednesday. This accounting method prevents Apple from having to endure a repeat of the backlash over its $1.99 fee for activating the 802.11n chip in Macbook Pros earlier this year.

The news came as part of Apple's second-quarter earnings conference call, in which the company reported increases in revenue and profits off strong sales of Macs and iPods. Later in the current quarter, the company plans to introduce the iPhone, which it hopes will create a third product line to complement the current lineup.

Apple plans to roll out "new software features and entirely new applications" for the iPhone over time, Oppenheimer said. But the company wants to keep the early adopters of the iPhone happy, since it's counting on those people to spread the gospel to the rest of the world, he said.

And while it wasn't a lot of money, Apple didn't make its users happy when it revealed in January it would have to charge $1.99 for a software download that unlocked the 802.11n wireless chips inside certain Macbooks and Macbook Pros. Because the famously secretive Apple kept the existence of this 802.11n chip under wraps, and because it recognized all of the revenue from the sale of those notebooks at the time they were sold, accounting experts said Apple had to charge a fee to satisfy accounting regulations that require companies to establish a value for product upgrades.

But by publicly declaring plans to roll out future enhancements to both the iPhone and Apple TV as well as its accounting methods, Apple has established a value for those future upgrades, since people will buy the product knowing they are getting more features over time.

"We hope the result will be to surprise and delight our iPhone customers," Oppenheimer said. As one might expect, he declined to provide specific examples of the features Apple has in the works, but the Apple rumor mill is likely in full swing following this news.

One enhancement that could be arriving soon is the ability to stream an iTunes library to the iPhone, which will soon be possible through a somewhat convoluted process using Sling Media's Slingbox software, as reported by CNET News.com. And Sling Media's CEO recently said that the companies had discussed extending that support directly to the iPhone, although it's not clear how eager Apple is to support third-party applications for its prized iPhone.

AT&T recently said it had received more than 1 million inquires from interested iPhone customers, but Apple has not said when it will start taking preorders for the product. Two versions are expected to be available for AT&T's network, a 4GB version for $499 and an 8GB version for $599.

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