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Apple News

We realize the New York Post isn't the professional reference of choice for most researchers, but an article in today's edition makes the assertion that Apple is among five corporations especially noted for accounting practices which overstate "core earnings" to a remarkable degree.

Writer John Crudele asked Standard & Poor's to run the numbers and come up with five firms whose reported earnings would be a lot lower without doing things like counting pension fund asset gains as profit and not counting stock options as expenses. In Apple's case, the latter practice helps produce reported earnings that are 1003 percent higher than they would be otherwise.

Please note that this is not illegal and that many companies decline to count the real cost of stock options against salaries. According to the article, for most companies, the amount of "overstatement" is in the 10 to 15 percent range. Apple Computer, however, gains considerably more than that from the practice, and they're not alone:

"The research firms says Raytheon may be reporting profits that are nearly 9,000 percent better than its 'core' real numbers. And Perkin-Elmer is 7,274 percent overstated; The Gap, 1,047 percent; Apple Computer, 1,003 percent; and Yahoo! 956 percent."

Comments: This is obviously another reason why some executives have nominal salaries in dollar amounts but take their compensation in stock options: it makes earnings look better. But what bothers us is the very real possibility that a great many companies may actually be making no money at all. It's also troubling that stating your earnings clearly, with no accounting gimmicks, may make you look bad by comparison.

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