It's expensed as it's incurred so revenues from the sale of Iphones do not match the biggest expense that was incurred to make it (R&D) many times. Yes, intangible are baked into the BS and IS, but like I said revenues don't match expenses, and the way intangibles are accounted for they are not going to reflect the fair value of what it's actually worth (unless it has to be impaired so it would be recorded at FV).

Look, NPM is a useful ratio, but when you are talking about a heavily intangible company a large majority of the time NPM piblished using book value, especially on a product line basis, are not going to anywhere near the same as if they were done at fair value.

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Posted by AbuTheMonkey

Chicago, IL

Member since May 2014

8020 posts

Posted on 6/13/17 at 11:09 pm to Mingo Was His NameO

quote:
Look, NPM is a useful ratio, but when you are talking about a heavily intangible company a large majority of the time NPM piblished using book value, especially on a product line basis, are not going to anywhere near the same as if they were done at fair value.

Well, maybe - I am not sure I would agree with that.

I think most IP economists don't believe that fair value is completely accurate, either, except in some circumstances (i.e., wine vintages or something that is pretty liquid). Taking away the Apple support system from the Apple IP portfolio strips the IP asset of a lot of its value. That's the approach that Ocean Tomo takes, for instance.

And in that case, if Apple is depreciating book value instead of FMV, then they aren't deducting as much 9 times out of 10, and their income statements look worse.

Also, yes, I know that expenses occurred don't match sales, but for a firm like Apple, their R&D is predictable enough YoY that you can have a pretty good idea of what an accurate margin is.

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