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Author: agentpreppie Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 200559  
Subject: Re: The mystery that is Apple Retail Date: 12/29/2002 11:09 PM
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Apple's accounting is done in such a way that it assigns a Cost of Goods Sold [COGS] to its various business units to account for production and overhead costs. The determination of this value is used to determine the profit/loss of the unit, and doesn't have to be directly linked to any real-world logic or events. All other expenses go into Corporate and shows up as SG&A or R&D.
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I posted a while back about how Apple changes its tax rate to smooth earnings.

http://boards.fool.com/Message.asp?mid=17668146

and I believe Apple (more specifically, Fred Anderson) is doing the same thing with Retail. It's useful as a tool to create good buzz and the profitability can be easily manipulated since it's still such a small part of Apple's overall revenue bases.


Between those two little sections you made some excellent points Plato. However (you knew that word was coming, admit it), all manufacturing companies that operate retail centers will manipulate the COGS to it's various units however they feel like doing it. It's one of the big things they teach you in managerial (aka, cost) accounting. As for tax smoothing, it's another one of the big things you learn when you get an accounting degree and it goes hand in hand with manipulating the COGS. The governments of the world have caught onto the little trick and companies can now work with the IRS (I believe other countries taxing authorities are starting to do the same) to come up with acceptable costing methods for the companies to work with and not be fined. In other words, what you are pointing out as an Apple accounting trick is actually standard practice among all businesses.

Agent
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