Can anyone explain what's up with this GAAP/non-GAAP business? I am aware of GAAP, but i thought it was something you either followed or were naughty and didn't follow, not that you could simultaneously follow and not follow.
All companies in the US are required to report GAAP numbers according to the rules. Some companies choose not to follow the rules. But this is risky, because eventually someone with an accounting background will detect the discrepancies, and notify the SEC.
Thus, it's become fashionable to report both GAAP and adjusted numbers, and highlight the adjusted numbers in your press releases. Now the SEC can't get you. You've followed the rules and reported the GAAP numbers.
During the dot-com bubble, companies used to report GAAP earnings alongside EBITDA. Earnings before Interest, Taxes, Depreciation, and Amortization. In other words, we earned all this money, if you pretend that all of these other expenses didn't cost us anything.
As Warren Buffett pointed out: "References to EBITDA make us shudder — does management think the tooth fairy pays for capital expenditures?" Charlie Munger called them "bullsh_t earnings."
EBITDA eventually got such a bad rap that companies stopped using it after the dot-com bubble. These days, companies that want to distract from the GAAP numbers will report "non-GAAP" or "adjusted" earnings. This simply means that instead of mechanically excluding ITDA, each company makes its own decisions about what to exclude.
Basically it just says that following one set of guidelines (the GAAP) their numbers are this, but following another set of guidelines (their own preferred accounting guidelines) their numbers are higher. It's kind of like the difference between listing your cumulative GPA and major GPA. The numbers are the same, it's just the ones you choose to include that are different.
It has to do with the leases. If you just sell the car, then you record revenue in the amount of the sale * as soon as the buyer takes possession (typically this is a dealer, and the dealer takes possession when the car leaves the factory gate).
Since Tesla is doing their own lease transactions with a guaranteed repurchase price, the GAAP rules state the lease payments must be treated similar to rental income.
In the long term, it will balance out, but Tesla is providing non-GAAP accounting because changes to the lease/buy-outright mix will cause massive swings to the GAAP numbers, but that isn't really representative of the underling health of the company. The non-GAAP numbers basically assume all cars are bought outright.
I just want to know, how much are they making from cars and how much from other sources, namely credits related to pollution laws which are nothing more than handouts
