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> Since depreciation is subtracted from revenue you just "bumped" up your revenue by ... No, you bumped your net income. Revenue is unaffected by the depreciat

by gradys 5y ago

> Since depreciation is subtracted from revenue you just "bumped" up your revenue by ... No, you bumped your net income. Revenue is unaffected by the depreciation change. Revenue is up 61%. Also, nobody would be fooled by an accounting trick like this. Analysts routinely compute EBITA, earnings before interest, taxes, and depreciation, exactly for this reason - filtering out the more purely financial/virtual expenses that are less informative for understanding the core business. They likely did it because you're required to report things like depreciation in a way that reflects reality. There could be tax implications for instance, since you can count depreciation expenses against your taxable earnings (though often companies maintain separate depreciation accounting for financial reporting vs taxes due to the different rules for each).

ChuckMcM 5y ago
Fair, it bumps net income not revenue. When I was younger, I took an accounting class from Santa Clara University (it was part of their Executive MBA program although I did not get an MBA) because I knew that I'd like to start my own company some day and needed to know how accounting worked. > Also, nobody would be fooled by an accounting trick like this. The course specifically covered "accounting tricks" that would create the most favorable impression in the eyes of the public and in the eyes of the analyst community. Playing around with depreciation rates was one of them. The assertion in class (which I've never had a chance to test) was that the IRS rarely, if ever, cared about your depreciation tables. That was damn close to 20 years ago so it most certainly could be different now, and I am not a tax accountant. If it has changed since then I am sure someone who has taken the class will correct me. I don't think it "fools" analysts, but I suspect they might trade on an understanding that retail investors might have a different take on what was reported than what the analysts read.

by gradys 5y ago

ChuckMcM 5y ago

Fair, it bumps net income not revenue. When I was younger, I took an accounting class from Santa Clara University (it was part of their Executive MBA program although I did not get an MBA) because I knew that I'd like to start my own company some day and needed to know how accounting worked. > Also, nobody would be fooled by an accounting trick like this. The course specifically covered "accounting tricks" that would create the most favorable impression in the eyes of the public and in the eyes of the analyst community. Playing around with depreciation rates was one of them. The assertion in class (which I've never had a chance to test) was that the IRS rarely, if ever, cared about your depreciation tables. That was damn close to 20 years ago so it most certainly could be different now, and I am not a tax accountant. If it has changed since then I am sure someone who has taken the class will correct me. I don't think it "fools" analysts, but I suspect they might trade on an understanding that retail investors might have a different take on what was reported than what the analysts read.