5 ms·

Not according to GAAP rules... http://www.zerohedge.com/news/2016-07-19/microsoft-misses-gaap-revenue-eps-beats-non-gaap-after-using-lower-tax-rate-stock-so ht

Not according to GAAP rules... http://www.zerohedge.com/news/2016-07-19/microsoft-misses-gaap-revenue-eps-beats-non-gaap-after-using-lower-tax-rate-stock-so http://www.zerohedge.com/news/2016-07-19/microsoft-misses-ga...

JumpCrisscross 10y ago
> adds back such items as Windows 10 deferrals to revenue What does this mean? Are Microsoft counting people who haven't upgraded as if they have upgraded?
- forgetsusername 10y ago
  >What does this mean? It sounds like they are deferring some of the revenue from licenses sold with the intention of booking it over the life of the OS, as "free" updates are released.
  - Dwolb 10y ago
    It might mean the opposite. GAAP rulea may dictate they book the revenue over the life of the OS to better match liabilities in the form of updates. MSFT want to book all the revenue now as an "economic reality". It sounds like they're also claiming restructurings of their phone hardware division was a "one time charge" and removing those expenses, again, to better represent the "economic reality".
    - forgetsusername 10y ago
      >GAAP rulea may dictate they book the revenue over the life of the OS to better match liabilities in the form of updates. MSFT want to book all the revenue now as an "economic reality". I think you might be right; the revenue should be deferred over the life of Windows 10, but their non-GAAP measure books it up front. Hence the top line beat. Not a particularly heinous accounting maneuver.
      - chenster 10y ago
        So the news is ... a lie?
        Dwolb 10y ago
        Not totally a lie. There are a finite number of accounting rules applied to unique businesses all over the country and globe. However, not all these rules allow a company to fully represent the financial state of the business. Therefore, companies try to reconcile these discrepancies through management guidance and non-GAAP accounting. As an observer, you need to make a judgement call on whether you agree with the GAAP numbers, the guidance numbers, or somewhere in between.
- nrh 10y ago
  it seems to come down to two main points, as far as consumer tech companies go: 1. GAAP says that revenue from a software service subscription (e.g. cloud service) can only be counted as revenue once the service has been delivered, not at time of sale. http://www.marketwatch.com/story/ea-to-ease-non-gaap-usage-amid-sec-pressure-2016-07-19 http://www.marketwatch.com/story/ea-to-ease-non-gaap-usage-a... http://www.grayboxpdx.com/blog/post/revenue-recognition-for-online-subscription-businesses http://www.grayboxpdx.com/blog/post/revenue-recognition-for-... 2. Equity-based compensation is accounted for as a cost. http://mercercapital.com/financialreportingblog/equity-based-compensation-are-non-gaap-earnings-misleading/ http://mercercapital.com/financialreportingblog/equity-based...
  - samfisher83 10y ago
    That is the standard definition for accounting and has been that way for a while: Persuasive evidence of an arrangement exists Delivery has occurred or services have been rendered The seller's price to the buyer is fixed or determinable Collectibility is reasonably assured. Stock compensation doesn't make it not an expense. It is coming from somewhere. It is coming from the equity holders pockets therefore it is a real cost. The basic definition is Assets=Liability+Equity. So rewriting it E=A-L If you you pay a person with cash: E-C=A-C-L When you pay person with equity: E-X where X is equity you are losing in both cases they are equivalent. So stock option are not free and need to be treated as an expense.
- Naga 10y ago
  Revenue deferral is a very strange term. What basically happened is Microsoft claims Windows 10 is free and gives it away to everyone, hence the non-GAAP income. However, under GAAP, they are not actually giving Windows 10 away for free. Instead, they book revenue from Windows 10 but because they aren't charging for it, they must expense it as a promotional activity. What part of this is a revenue deferral? Nowhere, really, except that revenue which should have been booked is not (because it's free). Microsoft obviously does not want to do this since it drops their earnings by a significant amount, but I'm sure their auditors gave them shit for it. Their auditors probably also made them book impairment charges on things they didn't feel were impaired.
  - samfisher83 10y ago
    Revenue deferral is not strange. It probably is a company has prepaid for licenses. Licenses can't be counted as revenue until it is delivered to them. However the cash can be collected early.
    - Naga 10y ago
      I meant it is a strange way of referring to items given away for free.
TheWiseOne3 10y ago
What companies use GAAP anymore? Do you know about anything about it?
lloyd-christmas 10y ago
> Not according to GAAP rules... Not "rules" but "guidelines". Or quite literally, "principles". "... stock soars" The thing is that GAAP vs Non-GAAP is pretty irrelevant unless they regularly change how they do it. If a company reports non-GAAP earnings every quarter with the same methodology, it's effectively the same as reporting GAAP. People on wall street aren't dumb. There is a reason the reaction was positive. Food for thought, here are GAAP vs non-GAAP reportings for the S&P 500 companies: http://www.auditanalytics.com/blog/wp-content/uploads/2015/11/NonGAAP-Table12.png http://www.auditanalytics.com/blog/wp-content/uploads/2015/1... For the non-finance people, this is like using snake case in a camel case language or vice versa. Sure, it's an annoyance the first time you look at the project. As long as it's consistent between files, it's not really worth withdrawing from your "things I can bitch about at the dinner table" account.
- lanevorockz 10y ago
  This belief that Wall Street is always correct is exactly what caused the previous economic crash. Speculators don't care about a correct investment decision is about riding the trends. If people are buying, it doesn't matter if you don't agree .. you have to buy as well it works as a hedge. btw, don't say " for the non-finance people " -> it's very arrogant and bankers are already hated as it is.
  - sidereal1 10y ago
    There's a lot more to finance than "evil bankers"
  - lloyd-christmas 10y ago
    > This belief that Wall Street is always correct is exactly what caused the previous economic crash. This is the easy over-simplification that makes for a convenient blame-game. > Speculators don't care about a correct investment decision is about riding the trends Speculators != Investors. > If people are buying, it doesn't matter if you don't agree .. you have to buy as well it works as a hedge. No. If other people are buying, you can sit there and do absolutely nothing. > btw, don't say " for the non-finance people" No. I'll go ahead and target my explanations to the exact people who may not understand the topic being discussed. If you feel like you're being looked down upon, that's your insecurity, not my problem.

JumpCrisscross 10y ago

> adds back such items as Windows 10 deferrals to revenue What does this mean? Are Microsoft counting people who haven't upgraded as if they have upgraded?

forgetsusername 10y ago
>What does this mean? It sounds like they are deferring some of the revenue from licenses sold with the intention of booking it over the life of the OS, as "free" updates are released.
- Dwolb 10y ago
  It might mean the opposite. GAAP rulea may dictate they book the revenue over the life of the OS to better match liabilities in the form of updates. MSFT want to book all the revenue now as an "economic reality". It sounds like they're also claiming restructurings of their phone hardware division was a "one time charge" and removing those expenses, again, to better represent the "economic reality".
  - forgetsusername 10y ago
    >GAAP rulea may dictate they book the revenue over the life of the OS to better match liabilities in the form of updates. MSFT want to book all the revenue now as an "economic reality". I think you might be right; the revenue should be deferred over the life of Windows 10, but their non-GAAP measure books it up front. Hence the top line beat. Not a particularly heinous accounting maneuver.
    - chenster 10y ago
      So the news is ... a lie?
      - Dwolb 10y ago
        Not totally a lie. There are a finite number of accounting rules applied to unique businesses all over the country and globe. However, not all these rules allow a company to fully represent the financial state of the business. Therefore, companies try to reconcile these discrepancies through management guidance and non-GAAP accounting. As an observer, you need to make a judgement call on whether you agree with the GAAP numbers, the guidance numbers, or somewhere in between.
nrh 10y ago
it seems to come down to two main points, as far as consumer tech companies go: 1. GAAP says that revenue from a software service subscription (e.g. cloud service) can only be counted as revenue once the service has been delivered, not at time of sale. http://www.marketwatch.com/story/ea-to-ease-non-gaap-usage-amid-sec-pressure-2016-07-19 http://www.marketwatch.com/story/ea-to-ease-non-gaap-usage-a... http://www.grayboxpdx.com/blog/post/revenue-recognition-for-online-subscription-businesses http://www.grayboxpdx.com/blog/post/revenue-recognition-for-... 2. Equity-based compensation is accounted for as a cost. http://mercercapital.com/financialreportingblog/equity-based-compensation-are-non-gaap-earnings-misleading/ http://mercercapital.com/financialreportingblog/equity-based...
- samfisher83 10y ago
  That is the standard definition for accounting and has been that way for a while: Persuasive evidence of an arrangement exists Delivery has occurred or services have been rendered The seller's price to the buyer is fixed or determinable Collectibility is reasonably assured. Stock compensation doesn't make it not an expense. It is coming from somewhere. It is coming from the equity holders pockets therefore it is a real cost. The basic definition is Assets=Liability+Equity. So rewriting it E=A-L If you you pay a person with cash: E-C=A-C-L When you pay person with equity: E-X where X is equity you are losing in both cases they are equivalent. So stock option are not free and need to be treated as an expense.
Naga 10y ago
Revenue deferral is a very strange term. What basically happened is Microsoft claims Windows 10 is free and gives it away to everyone, hence the non-GAAP income. However, under GAAP, they are not actually giving Windows 10 away for free. Instead, they book revenue from Windows 10 but because they aren't charging for it, they must expense it as a promotional activity. What part of this is a revenue deferral? Nowhere, really, except that revenue which should have been booked is not (because it's free). Microsoft obviously does not want to do this since it drops their earnings by a significant amount, but I'm sure their auditors gave them shit for it. Their auditors probably also made them book impairment charges on things they didn't feel were impaired.
- samfisher83 10y ago
  Revenue deferral is not strange. It probably is a company has prepaid for licenses. Licenses can't be counted as revenue until it is delivered to them. However the cash can be collected early.
  - Naga 10y ago
    I meant it is a strange way of referring to items given away for free.

TheWiseOne3 10y ago

What companies use GAAP anymore? Do you know about anything about it?

lloyd-christmas 10y ago

> Not according to GAAP rules... Not "rules" but "guidelines". Or quite literally, "principles". "... stock soars" The thing is that GAAP vs Non-GAAP is pretty irrelevant unless they regularly change how they do it. If a company reports non-GAAP earnings every quarter with the same methodology, it's effectively the same as reporting GAAP. People on wall street aren't dumb. There is a reason the reaction was positive. Food for thought, here are GAAP vs non-GAAP reportings for the S&P 500 companies: http://www.auditanalytics.com/blog/wp-content/uploads/2015/11/NonGAAP-Table12.png http://www.auditanalytics.com/blog/wp-content/uploads/2015/1... For the non-finance people, this is like using snake case in a camel case language or vice versa. Sure, it's an annoyance the first time you look at the project. As long as it's consistent between files, it's not really worth withdrawing from your "things I can bitch about at the dinner table" account.

lanevorockz 10y ago
This belief that Wall Street is always correct is exactly what caused the previous economic crash. Speculators don't care about a correct investment decision is about riding the trends. If people are buying, it doesn't matter if you don't agree .. you have to buy as well it works as a hedge. btw, don't say " for the non-finance people " -> it's very arrogant and bankers are already hated as it is.
- sidereal1 10y ago
  There's a lot more to finance than "evil bankers"
- lloyd-christmas 10y ago
  > This belief that Wall Street is always correct is exactly what caused the previous economic crash. This is the easy over-simplification that makes for a convenient blame-game. > Speculators don't care about a correct investment decision is about riding the trends Speculators != Investors. > If people are buying, it doesn't matter if you don't agree .. you have to buy as well it works as a hedge. No. If other people are buying, you can sit there and do absolutely nothing. > btw, don't say " for the non-finance people" No. I'll go ahead and target my explanations to the exact people who may not understand the topic being discussed. If you feel like you're being looked down upon, that's your insecurity, not my problem.