Income Statement: Apple and Samsung

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Revenue is one of the most important variables that investors typically consider in order to evaluate a company’s prospects. The revenue recognition is of high significance for a consistent accounting analysis as it provides the vision of the real gain a particular company can account for (Sondhi and Taub 301). Otherwise stated, it shows only those revenues that have been completed and excludes those that are still being processed.

When revenues are recorded for the accounting purposes, they are reported in accordance with the Generally Accepted Accounting Principles (GAAP). Hence, a company is obliged to meet two critical criteria before including the revenue in the book. First and foremost, it is important that a company fixes the transaction and the amount of money the client has agreed to pay. Secondly, it is essential to complete the transaction (Williams, Carcello and Neal 9). In other words, it is necessary that the client performs the expected payment. Otherwise, in case the payment has not been received yet, the revenue cannot be reported in the book. These requirements can be explained by the fact that the revenues reported for the accounting purposes should reflect the completed transactions only in order to provide accurate data regarding the profit.

The Difference between a Product and Period Expense

While evaluating expenses, it is critical to differentiate between product and period expenses. Thus, according to Mowen, Hansen, and Heitger, a product expense comprises the costs of “direct materials, direct labor, and manufacturing overhead,” whereas it does not include the costs of such operations as selling, storing, etc. (35). The authors likewise point out that a product expense can be divided into two types: prime cost and conversion cost.

A period expense, in its turn, includes those costs that are not related to the product expense: office supplies, salaries, advertising campaigns, etc. (Mowen, Hansen and Heitger 37).

The Matching Concept

The matching concept is the basic rule of composing consistent financial statements. According to this rule, it is essential to ensure that both the reported expenses and revenues refer to the same financial periods and are related to the same goods. In addition, it is not only the amount of the paid cash that needs to be registered in the framework of the matching concept but the relevant accruals and prepayments as well. Experts agree upon the point that the matching concept ensures valid accounting for revenues and inventory (Bendrey, Hussey and West 40).

Financial Statements

The analyzed financial statements are provided by Apple and Samsung companies. They both refer to 2015 and 2016 and were retrieved from the official websites. The Apple financial statements were reported on March 26 and March 28 of 2016 and 2015 relatively (Apple par.13). The Samsung financial statements were reported on March 31 and December 31 of 2016 and 2015 relatively (Samsung par. 1). The statements provide the information related to the revenues for a three-month period. It might be viewed that both companies follow the GAAP conventions while composing their financial statements. The links for the relevant financial statements might be seen in Works Cited Section.

Comparative Table

The table below represents a comparative analysis of the companies’ performance in five different dimensions: net income, net sales, operating expenses, income tax expense, and selling and administrative expenses. The represented variables should be interpreted as millions.

Apple Samsung
2016 2015 2016 2015
Net Income $10,516 $ 13,569 $ 4,371 $ 4,849
Net Sales $ 50,557 $ 58,010 $ 41,421 $ 42,828
Operating Expenses $ 5,934 $ 3,460 $ 2,501 $ 2,059
Income Tax Expense $ 3,628 $ 4,955 $1,555 $1,325
Selling and Administrative Expenses $ 3,423 $ 3,460 $ 10,594 $ 10,137

Table 1 “Comparative Analysis”.

Changes Comparison

The comparative table illustrates that both companies have shown a downward dynamic in 2016. Hence, it might be seen that the size of the net income in both companies has decreased since 2015. At this point, it should be noted that Apple has shown a more considerable decrease in the net income than Samsung. The net sales have also dropped since 2015, especially in Apple, that has lost almost 8 million dollars. The expenses, on the contrary, illustrate an upward dynamic in both companies. The most critical rise of the expenses can be seen in Apple, where the operating expenses have grown by 2 million dollars within a year. In the meantime, it should be noted that unlike Samsung, Apple has managed to reduce the income tax expenses that also signifies the negative character of its general performance.


It should be noted that comparing the financial information from year to year is easier that comparing the data reported by different companies. Hence, both Apple and Samsung have provided consistent financial statements that are composed in a convenient manner in terms of a comparative analysis. Meanwhile, the report formats differ from each other employing various terms for one and the same notion (ex: “Net Income” in Apple and “Total Earnings” in Samsung) that complicates the comparison.

Works Cited

Apple. Apple Reports Second Quarter Results. 2016. Web.

Bendrey, Mike, Roger Hussey, and Colston West. Essentials of Financial Accounting in Business, London: Cengage Learning, 2004. Print.

Mowen, Maryanne, Don Hansen, and Dan Heitger. Cornerstones of Managerial Accounting, Boston, Massachusetts: Cengage Learning, 2015. Print.

Samsung. Audited Financial Statements. 2016. Web.

Sondhi, Ashwinpaul, and Scott Taub. Revenue Recognition Guide, Chicago, Illinois: CCH, 2008. Print.

Williams, Jan, Joseph Carcello, and Terry Neal. GAAP Guide Level A, Chicago, Illinois: CCH, 2008. Print.

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