Apple's Strategy and Accounting
This memorandum is a financial reporting analysis of Apple Inc. This analysis comprises of four different aspects of Apple; Apple’s business environment, competitive strategies, economic and human resources in achieving those strategies and the influence of those strategies on Apple’s accounting policy.
A business environment encompasses all the factors and conditions that affect an entity’s operation. Apple operates its business on a geographic basis, which includes the Americas, Europe and Japan. America’s represent both North and South and the Europe segment includes Middle East and Africa. (p. 2-3) Apple sells its products through wholesalers, resellers, national and regional retailers and cataloguers. The
…show more content…
(p. 36) Apple’s most critical elements of accounting policies are allowance for doubtful accounts, inventory valuation, software development costs and warranty expense. One of Apple’s business strategies is to spread the distribution network so as to provide its products available to more customers. Therefore Apple employs a variety of sales forces from its direct online stores to third-party retail partners. (p. 1) However, there is also a simultaneous rise in bad debt. Apple set up its allowance for doubtful accounts policies to reduce credit risk by demanding necessary collaterals and sharing with distribution channel partners their financial responsibilities for collecting significant receivables. (p. 38) Due to the volatile nature of electronic markets and the innovative strategy of the company, Apple is faced with asset risk such as impairment of inventory, so it records write-down of the inventory to reflect the fair market value. (p. 15) Consistent with the emphasis on continual investment in research and development Apple incurs software development costs as one of its operational costs. (p. 1, 64) Relevant accounting policies indicates the type of the expense should be recorded as incurred and the coverage of the expenditure starts from the cost realized from innovative ideas to the release to the general public. (p. 64) Apple also concentrates on