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"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 "

Yes, I'm sure that accountants know how to manipulate the numbers. Arthur Anderson helped Enron do it, and Worldcom did it without the assistance of external accountants.

That doesn't change the fact that these companies are giving investors a false impression of the viability of their business by number manipulation.

This is why I find the British system of financial accounting preferable, because they don't use precise guidelines which can then be narrowly interpreted then manipulated.

One might argue that it's equally "standard practice" for company insiders to manipulate stock prices, grant options, and exercise them based on insider information. That doesn't mean that the behavior should be excused or overlooked.

"As I noted a few days ago, nobody will ever give Apple credit for its retail segment working in its favor... though I didn't expect Plato to jump on that bandwagon quite so quickly.

Paul "

The point I am trying to make is that the "numbers" will continue to look good because the "numbers" Apple present to investors have only a tenuous link to the reality of how well Retail is actually doing. It's not operational excellency or marketing genius propelling Retail to profitability - it's the manipulating of expense allocation.

If Apple had to account for the Retail segment as a completely separate entity, with all operational, marketing, and capital costs being accounted for separately, Retail wouldn't even be close to profitability.

Retail is profitable in the same way a dot-com was viable - only on paper.
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