Apple Iphone Case
1. Does ASC 985 apply to the iPhone?
ASC 985 is concerned with software, but it does not apply to the iPhone. According to
ASC-985-10-15-3, the “guidance in the Software Topic applies to computer software to be sold,
leased, or otherwise marketed as a separate product or as part of a product or process.” The
software updates that Apple plans on contributing to the iPhone at later times are instrumental to
the function of the phone. They are not part of a separate product or process.
However, ASC 985-605 includes “software that is more-than-incidental to the products
or services in the arrangement as a whole” as is stated in ASC 985-605-15-3c. Since Apple is
planning on supplying software past the point of purchase, Apple is acting in “postcontract
customer support.” The software updates that Apple plans on supplying fall under this portion of
985.
2. Does ASC 605 apply to the iPhone?
ASC 605 concerns itself with revenue recognition which is the entire issue with the iPhone.
According to ASC-605-10-05-1a, the “overall subtopic provides guidance on…revenue and
gains…[as well as] installment and cost recovery methods of revenue recognition.”
3. What is a multiple element arrangement?
According to 605-25-05-2, “vendors often provide multiple products, services, rights to use
assets, or any combination thereof.” These products may be necessary for one another but
delivery “may occur at different times or over different periods of time, and the customer’s
payments for these deliverables may be fixed, variable, or a combination of fixed and variable.”
Apple Iphone Case
Therefore, a multiple element arrangement is an agreement for a vendor to provide different
products at different times.
4. If Multiple Element Arrangement accounting were to apply to the iPhone, clearly
identify and name the elements. Explain (for or against) if Multiple Element Arrangement
accounting applies to the iPhone.
According to ASC 985-605-25-5, “software arrangements may provide licenses for multiple
software deliverables (for example, software products, upgrades or enhancements, postcontract
customer support, or services), which are termed multiple elements.” Apple clearly plans on
providing customers with software upgrades to the iPhone so this section would apply.
According to 985-605-25-44, “a vendor may agree to deliver software currently and provide the
