Accounting Rules change could End iPod touch Update Fee

Proposed accounting rule changes will let Apple finally record iPhone revenues all at once in the quarter in which it is earned without resorting to spreading it out over two years. This is all fine and good for Apple, but the same rule changes may also allow Apple to nix the fee that iPod touch owners are charged every time Apple releases a major update to its mobile operating system.

Here's what has been happening up to this point. Apple wanted to offer iPhone users free software updates. According to a reading of certain accounting rules relating to the Sarbanes-Oxley Act, items that gain significant new functionality after the sale—due to a firmware update, for instance—can't have the revenue recorded at the time of sale. The revenue is reported over a certain period of time, called subscription accounting. Since Apple planned to potentially offer new features in software updates, it records revenue from the sale if iPhones over a period of two years—the length of a standard carrier contract.

The reverse of this accounting happens for the iPod touch.