New accounting rules show that Apple's profitability of the iPhone could be much higher than previously expected, according to a new report.

The Financial Accounting Standards Board approved a change last week to the revenue reporting methods in the generally accepted accounting principles (GAAP). Under the old rules, Apple was required to spread its profits from the sale of each iPhone over the term of the carrier contract for the device, typically two years.

Analyst Yair Reiner of Oppenheimer said in a research note to clients that despite all of the publicity of under-reported iPhone revenue, the market still doesn't fully realize, and that will take time. Oppenheimer company has an outperform rating for AAPL stock and has increased its price target to $210 per share.

Incredibly, despite all the ink spilled over iPhone accounting, we think the Street continues to highly underestimate Apple's GAAP earnings, Reiner wrote.

We grant this will likely become a moot point within six months, as Apple incorporates new FASB accounting rules and recognizes more iPhone sales at time of sale. But until then, Apple's EPS will continue to surprise to the upside, even if revenue comes merely in line with Street expectations.

The report noted that Apple could sell an additional 7 million to 8 million iPhones in 2010 by adding Verizon and China Mobile as carriers.