FASB approves proposed accounting rule change

The United States Financial Accounting Standards Board has approved an accounting rule change that will allow Apple to abandon its practice of subscription accounting for the iPhone. Currently, Apple defers its iPhone revenue over two years to allow for free software updates to be delivered over the life of the cellular contract, and does the same for Apple TV; the new rule would allow the company to recognize more, if not all, of that revenue up front. Apple, along with several other tech companies, had lobbied the FASB in favor of the rule change as more devices become dependent on software for their core functionality, such as the iPod touch, which up until now has seen each major update come at a cost due to the different methods used to account for its revenue. Most companies are expected to adopt the rule beginning in 2011; it is unclear whether Apple plans on making the switch at the start of its 2011 fiscal year, which begins on September 27.