4 ms·

You can hide profit on the paper, by investing it. So it is impossible to fine under consideration of profits. The only way to do is to use revenue, but judges

by Radle 8y ago

You can hide profit on the paper, by investing it. So it is impossible to fine under consideration of profits. The only way to do is to use revenue, but judges should still consider the business profit margin.

garmaine 8y ago
That’s not the only way. Independent government auditors could make their own profits assessment and work off that. This is exactly what is done in other jurisdictions and other industries.
- Radle 8y ago
  Let's say you have one profit bringing business unit like google ads. (Let's call it main unit) but you also have internal startups in your company (side units). But you only have one operations department, only one HR department etc. How do you account the expenses of these departments in relation to main business and the side units? You can't. If people are not forced don't write down exactly whether they spent their time on working for the main unit or the side units units, you can't later account it correctly. Unfortunately it's not even clear for the company what happens sometimes. You might for example hire an employee, but place him in a different business unit than originally planned. Or the employee later on changes business units. The other problem with this is even if you require such a strict accounting setup, you can't tell whether employees and/or departments are accounting their efforts correctly, it's just incredible difficult to enforce the rule; to make sure they don't lie. Even if you think hey you can do it, you have to rigorously enforce this for all companies in your juridiction, because as soon as you stop looking, they will stop caring. So the problem is you can't tell the profits before "internal investments" as long as you can't pin down operational costs. You'll see that the only thing that you can accurately account for is the main business units revenue, but you can't give a precise number on operational income. (Which is revenue - product costs - operational costs).
  - garmaine 8y ago
    The setup explicitly allows for contextual customization of approach. You’re right that it is too complex an issue to precommit a strategy, which is why you don’t. It’s up to the discretion of the judge and the court as to what accounting strategy is used in the audit. If the company thinks it is unfair they can fight it as part of the proceedings or under an appeal.

by Radle 8y ago

garmaine 8y ago

That’s not the only way. Independent government auditors could make their own profits assessment and work off that. This is exactly what is done in other jurisdictions and other industries.

Radle 8y ago
Let's say you have one profit bringing business unit like google ads. (Let's call it main unit) but you also have internal startups in your company (side units). But you only have one operations department, only one HR department etc. How do you account the expenses of these departments in relation to main business and the side units? You can't. If people are not forced don't write down exactly whether they spent their time on working for the main unit or the side units units, you can't later account it correctly. Unfortunately it's not even clear for the company what happens sometimes. You might for example hire an employee, but place him in a different business unit than originally planned. Or the employee later on changes business units. The other problem with this is even if you require such a strict accounting setup, you can't tell whether employees and/or departments are accounting their efforts correctly, it's just incredible difficult to enforce the rule; to make sure they don't lie. Even if you think hey you can do it, you have to rigorously enforce this for all companies in your juridiction, because as soon as you stop looking, they will stop caring. So the problem is you can't tell the profits before "internal investments" as long as you can't pin down operational costs. You'll see that the only thing that you can accurately account for is the main business units revenue, but you can't give a precise number on operational income. (Which is revenue - product costs - operational costs).
- garmaine 8y ago
  The setup explicitly allows for contextual customization of approach. You’re right that it is too complex an issue to precommit a strategy, which is why you don’t. It’s up to the discretion of the judge and the court as to what accounting strategy is used in the audit. If the company thinks it is unfair they can fight it as part of the proceedings or under an appeal.