FORTUNE -- Until I read Daniel Eran Dilger's piece on Apple's deferred earnings Friday in AppleInsider I'd forgotten what a big deal these hidden earnings were just a few years ago.
Dilger explains with admirable clarity why Apple (AAPL) has been holding some revenue in reserve each quarter to account for such things as AppleCare, iTunes gift cards and free software.
"Apple's deferred revenues began rapidly building," he writes, "when the company initiated 'subscription accounting' in 2007 with the release of the original iPhone, a practice that set aside a portion of new income that the company did not officially, immediately recognize it in its earnings reports, even though the company had collected the money.
"Instead, Apple incrementally recognized a fraction of that deferred revenue each quarter over a two year period. The practice was designed to ensure that revenue wasn't counted ahead of delivering a full product, because in Apple's accounting, the iPhone wasn't finished until two years of software updates had been provided to the end user."
I wrote quite a bit about Apple's deferred revenue -- and Wall Street's failure to wrap its head around it -- from early 2008 to late 2009, when the U.S. government's accounting rules changed. See, for example, Spotlight on Apple's hidden revenue stream and An accounting rule in Apple's favor.
The issue popped back in the news this week -- and Dilger was writing about it again -- because Apple announced Monday that the company expects its deferred revenue in the current quarter to be a bit larger than usual to account for the fact that OS X and iWorks are now free.
About $900 million larger.
That's in addition to the more than $10 billion in deferred revenue that Apple was already sitting on as of Sept. 29.
$10.96 billion is no small change. It's more, as Dilger can't resist pointing out, than Samsung earned last quarter ($8.2 billion). It's three times what Google (GOOG) earned ($3.4 billion).
"Incredibly," Dilger writes, "none of Apple's critics in the tech media, or even in mainstream financial reporting circles, seems to realize this pool of billions even exists."
That's not entirely true. Analysts may disagree about the significance of the $900 million increase, but at least they're talking about it. (See What the analysts are saying.)
Which is more than they were doing in 2008 and 2009.
Act One of next week's two-part Apple extravaganza begins Monday after the markets close
Ignore for a moment, if you can, the clamor and hype surrounding next Wednesday's special event and the new tablet computer Steve Jobs is expected to reveal.
Wednesday is the second act of a two-part performance that Apple (AAPL) has stage managed for Wall Street next week.
Act One starts Monday after the markets close, when the company reveals MOREPhilip Elmer-DeWitt - Jan 22, 2010 1:35 PM ET
On Wednesday, when Apple announces its fiscal 2009 first-quarter earnings, the business press will rush to report the key metrics: number of units sold for Macs, iPods and iPhones, as well as overall company sales, earnings, and gross margins.
But according to some long-time Apple watchers, what really matters tomorrow is whether reporters and analysts will fail -- once again -- to recognize the rapidly growing value of Apple's hidden revenue MOREPhilip Elmer-DeWitt - Jan 20, 2009 9:50 AM ET
Blogger-analyst Andy Zaky, whose earnings estimates for Apple (AAPL) this year have proved considerably more accurate than the professionals' (see here), is predicting "the mother of all earnings blowouts" when the Christmas quarter's results come in.
In a preliminary report published Monday on Seeking Alpha and his blog Bullish Cross, Zaky estimates that when Apple releases its fiscal 2009 Q1 results in January, it will report earnings of $1.96 per share MOREPhilip Elmer-DeWitt - Nov 11, 2008 8:43 AM ET
There's a theory favored by savvy Apple watchers that the first generation iPhone -- greeted with such hoopla last year -- was not actually the real thing.
That iPhone -- the one that hundreds of thousands of Americans queued up to buy for up to $599 apiece, the one that Time magazine named the Invention of the Year, the one that six million people purchased before Apple finally stopped making them in MOREPhilip Elmer-DeWitt - Jul 9, 2008 7:31 AM ET
Last July, Apple (AAPL) announced that revenue from the iPhone would be recorded in an unusual way. Like Apple Care and Apple TV, iPhone sales would not be booked when the device was sold -- as they are for a Mac or an iPod -- but spread out over the life of the iPhone (set, somewhat arbitrarily, at two years).
More than seven months have passed and nobody -- not the MOREPhilip Elmer-DeWitt - Feb 11, 2008 2:07 PM ET
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