Prominent Accountants Blast Apple's $1.99 802.11n Upgrade Reasoning

MacRumors · Jan 25, 2007, 10:06 AM

Some sites have been picking up on a recent Wall Street Journal article (paid subscription required) that quoted prominent accountants disregarding Apple's stated reasons for charging $1.99 for enabling 802.11n capability on Core 2 Duo based Macs and the Mac Pro.

A statement from Apple had previously blamed the charge on "generally accepted accounting principles", or GAAP. However, the Journal's interviewees do not agree.

Quote:

"GAAP doesn't require you to charge squat," says Lynn Turner, managing director of research at Glass Lewis & Co. and a former chief accountant of the Securities and Exchange Commission. "You charge whatever you want. GAAP doesn't even remotely address whether or not you charge for a significant functionality change. GAAP establishes what the proper accounting is, based on what you did or didn't charge for it."

[...]

Still, Apple's language surprised officials who oversee accounting rules. "Accounting doesn't require any charge for anything," says Edward Trott, a member of the Financial Accounting Standards Board, which writes the accounting rules. "No, GAAP doesn't tell you to do anything. You need to work out your transaction with your customer, and GAAP will tell you how to reflect your transaction with that customer."

The reaction from the Mac community appears to be mixed since the formal announcement from Apple. While many were happy to see the final price drop more than half from its previously rumored $4.99 pricetag, many others were frustrated at having to pay anything for hardware capability already in their systems.

0tim0 · Jan 25, 2007, 10:11 AM

$1.99. Who cares? If you think that is so expensive, live without "n". You'll be just fine.

--t

AidenShaw · Jan 25, 2007, 10:12 AM

Quote:

Originally Posted by 0tim0

$1.99. Who cares? If you think that is so expensive, live without "n". You'll be just fine.

Isn't it the case that until you get rid of all your b/g kit, you'll be "living without n" anyway?

longofest · Jan 25, 2007, 10:12 AM

Note, its not the fact that Apple is charging that the accountants are blasting, but Apple's stated reasoning.

Us in the mac community seem to have two different beefs...

a) we don't like the fact that they are doing it at all
b) we don't like the reason they gave for it

(or none of the above)

combatcolin · Jan 25, 2007, 10:16 AM

Seems there disagreement over whether apple need to do this, so Apple are playing safe and charging.

Of course, you would think the obvious solution would be for Apple to talk to the regulatory body and simply ask them.

If the defense lawyers are confused then so must be the prosecution council.

Gasu E. · Jan 25, 2007, 10:21 AM

I didn't read the detailed criticisms, just the clipped quotes. But these indicate Apple is being criticized for the wrong reasons. Apple didn't say "GAAP requires us to charge something." Apple said, in effect, "if we don't charge something, GAAP may require us to consider the original product to be a partial shipment, which may require us to restate earnings." Even if Apple is right (and it is certainly a matter of opinion if they are), there is no "requirement that they charge something." Apple in any case has the option to restate earnings.

hob · Jan 25, 2007, 10:21 AM

I really really really want some news agency to use the word dubious to describe Apple in this

It does sound strange. Why charge $1.99? Why charge at all? $1.99 is such a token amount...

That's like £1. I sneeze £1. And I'm a student!

synth3tik · Jan 25, 2007, 10:23 AM

If I pau the $1.99 will depend on if I get the Airport, at which point 2 bucks is no big deal

Gasu E. · Jan 25, 2007, 10:25 AM

Quote:

Originally Posted by combatcolin

Of course, you would think the obvious solution would be for Apple to talk to the regulatory body and simply ask them.

Which regulatory body would that be? And what would they ask?

hob · Jan 25, 2007, 10:25 AM

Oh, and one further point. This only affects people that bought the very very latest Mac's, and the latest Airport base station, right? I don't understand the big deal - because surely it only affects a handful of people.

That being said, it is a little... dubious...

Phil A. · Jan 25, 2007, 10:27 AM

Quote:

Originally Posted by synth3tik

If I pau the $1.99 will depend on if I get the Airport, at which point 2 bucks is no big deal

If you get the new Airport base-station, you don't need to pay for the upgrade anyway because it's included in the box

Gasu E. · Jan 25, 2007, 10:28 AM

Quote:

Originally Posted by hob

I really really really want some news agency to use the word dubious to describe Apple in this

It does sound strange. Why charge $1.99? Why charge at all? $1.99 is such a token amount...

That's like £1. I sneeze £1. And I'm a student!

Obviously because Apple thinks there is some principle involved. $1.99 just about covers their handling costs. It's preposterous to think that Apple is lying to cover up some profit-generating scheme, because there ain't no profit in this.

Copland · Jan 25, 2007, 10:28 AM

Quote:

Originally Posted by synth3tik

If I pau the $1.99 will depend on if I get the Airport, at which point 2 bucks is no big deal

Well, if you get the airport, you don't have to pay for the upgrade. (Edit: Woops, beat to it)

I'm of the opinion that it's fine. I'm currently quite in the red, but I could probably find $2 on the ground if I had/wanted to.

cherrypop · Jan 25, 2007, 10:28 AM

This draft n upgrade story is doing a great job of taking the focus off of the options story. Calculated?

vitrector · Jan 25, 2007, 10:29 AM

I really don't understand how this even is an issue. People buy a computer with certain capabilities, and presumably are happy with it. Then they get the opportunity to upgrade the software of the wireless chip for $1.99, less than most espresso drinks, and they get upset. This is just so blown out of proportion. I would have gladly paid the $4.99.
People are writing about this because AAPL is so popular right now, and there are all the knuckle-heads that think Apple, Inc. is abusing them by 2 bucks.
I think it is great to get n without having to buy another linksys or Apple base station right away.

brisully · Jan 25, 2007, 10:29 AM

That's like half a Starbucks latte. Big deal.

Diatribe · Jan 25, 2007, 10:31 AM

Why enable 802.11n at all?

We wouldn't have this discussion if Apple decided to just not enable it.
Would you feel better then?

Twenty1 · Jan 25, 2007, 10:32 AM

Having sat through more accounting classes than I care to remember, the accountants are technically right about GAAP. Like any good Accountants, they are really nitpicking what Apple is doing (which is why I really hate accounting.)

If you remember the line from Pirates of the Carribean, GAAP is "more like guidelines."

Yes, GAAP doesn't require you do to many things - it's not a law per say. However, businesses constantly use the guidelines to recognize revenue in a way that is positive for them. You hear about it all the time if you follow any financial news.

Abstract · Jan 25, 2007, 10:32 AM

I wasn't sure what to vote this story on MR's front page.

raggedjimmi · Jan 25, 2007, 10:33 AM

I'd rather it be free, but seeing I won't be getting an N wireless router I couldn't care less

Panu · Jan 25, 2007, 10:35 AM

$1.99 won't even buy a cup of coffee these days, so what's the big deal?

If someone says, "It's the principle of the thing," then I'd say, "You need to learn how to choose your fights."

twoodcc · Jan 25, 2007, 10:37 AM

Quote:

Originally Posted by raggedjimmi

I'd rather it be free, but seeing I won't be getting an N wireless router I couldn't care less

i'd rather it be free also.....i might eventually get the N wirless router.....mainly b/c of the usb drive ......but then i won't have to pay the fee, correct?

dejo · Jan 25, 2007, 10:38 AM

Quote:

Originally Posted by Panu

$1.99 won't even buy a cup of coffee these days, so what's the big deal?

You need to shop elsewhere besides Starbucks.

RGunner · Jan 25, 2007, 10:39 AM

Big business just getting bigger... all about the bottom $$.

pale9 · Jan 25, 2007, 10:40 AM

i would not have a problem at all if apple would have simply said they will charge $x.xx for the update. not that i want to pay, but they are running a business and they can charge whatever they want (even though almost nobody charges for firmware updates).

*however*, i hate being sold for a fool, and that is exactly what apple did by coming up with a totally bogus and stupid reason why 'they had to' charge for the update... yes, accounting rules made us do it! no, it is SOX!!!! wait, homeland security forced us to!

View Poll Results: How do you feel about Apple's decision to charge $1.99 for 802.11n
It's Fine	89	36.78%
Don't like it	104	42.98%
It'd be okay if they gave an adequate explanation	49	20.25%
Voters: 242. You may not vote on this poll

Jan 25, 2007, 10:11 AM	#2
0tim0 macrumors newbie Join Date: Oct 2005	Who cares? $1.99. Who cares? If you think that is so expensive, live without "n". You'll be just fine. --t

Jan 25, 2007, 10:16 AM	#5
combatcolin macrumors 68020 Join Date: Oct 2004 Location: Northants, UK	Seems there disagreement over whether apple need to do this, so Apple are playing safe and charging. Of course, you would think the obvious solution would be for Apple to talk to the regulatory body and simply ask them. If the defense lawyers are confused then so must be the prosecution council. __________________ PC 24" Dell WS Monitor 500GB Lacie Triple 40 GB iPod, 1st gen iMac Bought sister a 1.25Ghz eMac Wide Aspect F810 Camera 1GB XD Card

Jan 25, 2007, 10:21 AM	#7
hob macrumors 68000 Join Date: Oct 2003 Location: London, UK	I really really really want some news agency to use the word dubious to describe Apple in this It does sound strange. Why charge $1.99? Why charge at all? $1.99 is such a token amount... That's like £1. I sneeze £1. And I'm a student! __________________ see robmac.net for my work

Jan 25, 2007, 10:23 AM	#8
synth3tik macrumors Demi-God Join Date: Oct 2006 Location: Minneapolis, MN	If I pau the $1.99 will depend on if I get the Airport, at which point 2 bucks is no big deal __________________ Come check out my music! http://www.batteriesarentfood.com http://www.cdbaby.com/Artist/BatteriesarentFood

Jan 25, 2007, 10:12 AM	#4
longofest Demi-God (Editor) Join Date: Jul 2003 Location: Falls Church, VA	Note, its not the fact that Apple is charging that the accountants are blasting, but Apple's stated reasoning. Us in the mac community seem to have two different beefs... a) we don't like the fact that they are doing it at all b) we don't like the reason they gave for it (or none of the above)

Jan 25, 2007, 10:21 AM	#6
Gasu E. macrumors 6502a Join Date: Mar 2004	I didn't read the detailed criticisms, just the clipped quotes. But these indicate Apple is being criticized for the wrong reasons. Apple didn't say "GAAP requires us to charge something." Apple said, in effect, "if we don't charge something, GAAP may require us to consider the original product to be a partial shipment, which may require us to restate earnings." Even if Apple is right (and it is certainly a matter of opinion if they are), there is no "requirement that they charge something." Apple in any case has the option to restate earnings.

Jan 25, 2007, 10:25 AM	#10
hob macrumors 68000 Join Date: Oct 2003 Location: London, UK	Oh, and one further point. This only affects people that bought the very very latest Mac's, and the latest Airport base station, right? I don't understand the big deal - because surely it only affects a handful of people. That being said, it is a little... dubious... __________________ see robmac.net for my work

Jan 25, 2007, 10:28 AM	#14
cherrypop macrumors member Join Date: Sep 2006	This draft n upgrade story is doing a great job of taking the focus off of the options story. Calculated?

Jan 25, 2007, 10:29 AM	#15
vitrector macrumors member Join Date: Jan 2002	no big deal I really don't understand how this even is an issue. People buy a computer with certain capabilities, and presumably are happy with it. Then they get the opportunity to upgrade the software of the wireless chip for $1.99, less than most espresso drinks, and they get upset. This is just so blown out of proportion. I would have gladly paid the $4.99. People are writing about this because AAPL is so popular right now, and there are all the knuckle-heads that think Apple, Inc. is abusing them by 2 bucks. I think it is great to get n without having to buy another linksys or Apple base station right away.

Jan 25, 2007, 10:29 AM	#16
brisully macrumors member Join Date: Jan 2006 Location: Chicago Area	That's like half a Starbucks latte. Big deal.

Jan 25, 2007, 10:31 AM	#17
Diatribe macrumors 68040 Join Date: Jan 2004 Location: Costa Rica (yes, I moved)	Why enable 802.11n at all? We wouldn't have this discussion if Apple decided to just not enable it. Would you feel better then? __________________ Knowledge - fueled by curiosity Mac Beginner's Guide \| My Adium Xtras

Jan 25, 2007, 10:32 AM	#18
Twenty1 macrumors member Join Date: Feb 2006	Gaap... Having sat through more accounting classes than I care to remember, the accountants are technically right about GAAP. Like any good Accountants, they are really nitpicking what Apple is doing (which is why I really hate accounting.) If you remember the line from Pirates of the Carribean, GAAP is "more like guidelines." Yes, GAAP doesn't require you do to many things - it's not a law per say. However, businesses constantly use the guidelines to recognize revenue in a way that is positive for them. You hear about it all the time if you follow any financial news.

Jan 25, 2007, 10:32 AM	#19
Abstract macrumors Demi-God Join Date: Dec 2002 Location: It's classified.	I wasn't sure what to vote this story on MR's front page. __________________ "Oh, I've always wanted to touch Stanley," signs teacher Fran Zakoor, embracing the kids… ESPN Article, 04/09/2008

Jan 25, 2007, 10:33 AM	#20
raggedjimmi macrumors 604 Join Date: Jan 2005	I'd rather it be free, but seeing I won't be getting an N wireless router I couldn't care less __________________ www.bossbaddie.com

Jan 25, 2007, 10:35 AM	#21
Panu macrumors member Join Date: Mar 2005 Location: Virginia suburbs of DC	Why does anyone care? $1.99 won't even buy a cup of coffee these days, so what's the big deal? If someone says, "It's the principle of the thing," then I'd say, "You need to learn how to choose your fights."

Jan 25, 2007, 10:39 AM	#24
RGunner macrumors 6502a Join Date: Jul 2002 Location: Midnight Sun	its NOT fine. Big business just getting bigger... all about the bottom $$.

Jan 25, 2007, 10:40 AM	#25
pale9 macrumors regular Join Date: Oct 2005 Location: cary, north carolina, before that boca raton, fla, before that europe, texas, panama, new york	pissed off at the stupid reasoning, not the $1.99 i would not have a problem at all if apple would have simply said they will charge $x.xx for the update. not that i want to pay, but they are running a business and they can charge whatever they want (even though almost nobody charges for firmware updates). however, i hate being sold for a fool, and that is exactly what apple did by coming up with a totally bogus and stupid reason why 'they had to' charge for the update... yes, accounting rules made us do it! no, it is SOX!!!! wait, homeland security forced us to!

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