There are forumlas to determine materialty, they are generally based on assets. For example, I have a client that has around 15,000,000 in assets at any given period. Materiality from one of the formulas available for use says that a material amount for this company is any amount greater than 250,000. I would, therefore, contend that the billions in assets that Apple claims would push materiality up into the millions easily. It is probably close to 5-10M. Which makes sense. Look at the financials. Add or subtract 5M from the revenues (total revenues). Does your opinion change? No. Why? Because the numbers are so big that 5-10M is pocket change, and they easily spend that on standard operating expenses in days (if not hours). Therefore, rounding down to an even $5M from a figure closer to 6 would not be material, though it is improper. Even materiality doesn't change the concept of rounding. You round up if it's over half and down if it's under half. In revenues, you never round up because you'd be paying taxes on money you didn't collect. You round to the nearest DOLLAR. Not the nearest million.

Summary - if it were rounding, it would not be a material change. It's probably not rounded that far, maybe to the nearest thousand or so, for tax purposes more than any other reason.

Incidentally, if you would read the notes attached to the financial statment I bet it tells you this information, as they are required to disclose this type of stuff according to GAAP. A little research answers questions a lot of the time.

Apple doesn't round down to be on the safe side. They follow GAAP accounting practices, and so much rounding would be changing a material fact.

Apple has to do some rounding. I highly, highly doubt that Apple reported exactly $5.41 billion in revenue or $818 million in profit, especially given that they don't sell products at round multiples of one hundred.

Peter, Apple doesn't make cases for the iPhone yet. I don't think they were reporting earnings for third-party products in the same income category as the iPhone. I could be wrong, but I don't think so.

The reason for this is to stay in compliance with the Sarbanes-Oxley Act. Remember the hubbub regarding the 802.11n enabler for Core 2 Duo Macs that you had to pay for? The few dollars charge was to stay in compliance with SOA as well. If a company adds any significant new features to a product after it was originally purchased, then according to SOA, you didn't provide the whole product to the customer at the time of purchase and so you shouldn't have reported the income from that product in the quarter in which the consumer originally purchased it.

So Apple is reporting earnings from each unit over several quarters so that it can continually provide software updates and significant new features to iPhone customers without having to charge them a few dollars each time.

It's kind of stupid, but that's the way it is.

I guess they didn't sell a lot of cases, then.

Thanks to all of you. This sort of thing is why I leave the comments turned on. ☺

http://news.com.com/2100-1047_3-6198377.html

There's a whole section on it.

The $5 million is correct, because Apple is reporting the cost of iPhones over a 24-month period.

What? I don't understand.

Also, where does it say that?

Peter Oppenheimer specifically said in the conference call that this actually does NOT include accessories. Presumably this is because Apple didn't actually have any available to sell at launch…

Except the cases.

Oppenheimer also noted in the conference call (I personally heard live both this and the previous quote I attributed to him) that the 270,000 figure includes iPhones that were sold to AT&T, which then has to resell them to their customers.

That makes sense.

Phil: Good point.

Apple doesn't round down to be on the safe side. They follow GAAP accounting practices, and so much rounding would be changing a material fact.

Also, despite the footnote saying that the revenue includes iPhone accessories, Peter Oppenheimer specifically said in the conference call that this actually does NOT include accessories. Presumably this is because Apple didn't actually have any available to sell at launch; the bluetooth headset created by Apple has only recently become available.