4 ms·

$3B accounting error by The Pentagon

46 points by Eumenes 3y ago

belter 3y ago
"A billion here, a billion there, and pretty soon you're talking real money"
fn-mote 3y ago
tl;dr - Accounting used "new" value of weapons sent, but was supposed to use "depreciated" value.
- MichaelZuo 3y ago
  I wonder if that's inflation adjusted or not, because I can easily imagine that after factoring in inflation the depreciated value of a 30 year old weapon system is about the same as the new price 30 years ago.
  - 0xcde4c3db 3y ago
    I'm not an accountant, and I don't know how the Pentagon approaches depreciation schedules, but most examples I've seen in general descriptions have annualized rates much higher than inflation. Also, some methods have a final period over which the the depreciation is 100% of the remaining value, which can't be offset by any amount of inflation.
    - MichaelZuo 3y ago
      How can 100% of the value be depreciated? Scrap value is worth more than zero.
      - KptMarchewa 3y ago
        Because you can have to pay more for proper decomissioning than any raw materials worth. You don't want to sell working explosives (or, nukes) to random scrap yards but make sure they aren't working.
        MichaelZuo 3y ago
        So then it seems like it should have negative value instead of zero. It's extremely unlikely for it to perfectly cancel out at 0.
      - sammywater 3y ago
        Depreciation isn't based on realistic estimates. They're standards issued by a governing body to try and capture some expense of the reality of depreciation. For example, there's not a Dodge minivan vs Honda minivan depreciation difference, even though, if you've had both, you know one depreciates much faster than the other. In the example below, it says 5 years for furniture. Is all furniture worthless after 5 years? Of course not. There's an entire industry of centuries old antiques. "Depreciation is a non-cash business expense that is allocated and calculated over the period that an asset is useful to your business." You ask How? More info here: "Depreciation Concepts" - https://www.principlesofaccounting.com/chapter-10/depreciation-concepts/ https://www.principlesofaccounting.com/chapter-10/depreciati... example: https://www.myaccountingcourse.com/accounting-dictionary/images/depreciation-schedule-example.jpg https://www.myaccountingcourse.com/accounting-dictionary/ima... source: https://www.myaccountingcourse.com/accounting-dictionary/depreciation-schedule https://www.myaccountingcourse.com/accounting-dictionary/dep...
        MichaelZuo 3y ago
        By these standards the pentagon will have sent $0 worth of stuff to Ukraine?
      - someotherperson 3y ago
        Not an accountant, might have issues: There are depreciation schedules in taxation that let you offset your tax. To this effect, 100% depreciation would expense the item (and thus reduce the taxable income). Because the tax doesn't represent 100% of the value you paid for the item, it doesn't mean that the item no longer with value.
      - johngladtj 3y ago
        Any scrap value you realize is recorded as profit
      - whinenot 3y ago
        Scrap has storage and disposal costs, especially for things that go boom. Giving old war machines and ordnance away is probably a huge expense reduction for all NATO donor countries.
- blitzar 3y ago
  I thought this was the idea all along... the announcements were all using as new sticker prices +r&d for the first manufacturing run on 20 year old hardware, it was a feature not a bug. Cynically this "accounting error" is either an excuse to send more hardware to achive the same absolute $$ cost, or a method of communicating that the "cost" to the taxpayer was much (much much) lower than it really was.
lookboil 3y ago
I'm old enough to remember the $2 trillion Pentagon accounting error announced by Rumsfeld the day before 9/11. Didn't hear much about that in the intervening years
- ed 3y ago
  For context https://www.metabunk.org/threads/debunked-rumsfeld-says-2-3-trillion-missing-from-the-pentagon.165/ https://www.metabunk.org/threads/debunked-rumsfeld-says-2-3-...
  - snapcaster 3y ago
    Not very satisfying debunking, $2.3 trillion being untrackable implies many billions being stolen. Don't really think it had much to do with 9/11, just a huge fucking grift on the taxpayers
  - djfobbz 3y ago
    [flagged]
    - ROTMetro 3y ago
      I too when presented with facts think to myself 'but who is the person who typed these all out'. Do you have anything specific about these facts that you disagree with, or are you just spreading FUD to spread FUD? Did you eat up all the Microsoft FUD around Linux in the past too?
dsq 3y ago
"You didn't think they actually spent ten thousand dollars for a hammer and thirty thousand for a toilet seat, did you?" Hopefully this is the explanation.

46 points by Eumenes 3y ago

belter 3y ago

"A billion here, a billion there, and pretty soon you're talking real money"

fn-mote 3y ago

tl;dr - Accounting used "new" value of weapons sent, but was supposed to use "depreciated" value.

MichaelZuo 3y ago
I wonder if that's inflation adjusted or not, because I can easily imagine that after factoring in inflation the depreciated value of a 30 year old weapon system is about the same as the new price 30 years ago.
- 0xcde4c3db 3y ago
  I'm not an accountant, and I don't know how the Pentagon approaches depreciation schedules, but most examples I've seen in general descriptions have annualized rates much higher than inflation. Also, some methods have a final period over which the the depreciation is 100% of the remaining value, which can't be offset by any amount of inflation.
  - MichaelZuo 3y ago
    How can 100% of the value be depreciated? Scrap value is worth more than zero.
    - KptMarchewa 3y ago
      Because you can have to pay more for proper decomissioning than any raw materials worth. You don't want to sell working explosives (or, nukes) to random scrap yards but make sure they aren't working.
      - MichaelZuo 3y ago
        So then it seems like it should have negative value instead of zero. It's extremely unlikely for it to perfectly cancel out at 0.
    - sammywater 3y ago
      Depreciation isn't based on realistic estimates. They're standards issued by a governing body to try and capture some expense of the reality of depreciation. For example, there's not a Dodge minivan vs Honda minivan depreciation difference, even though, if you've had both, you know one depreciates much faster than the other. In the example below, it says 5 years for furniture. Is all furniture worthless after 5 years? Of course not. There's an entire industry of centuries old antiques. "Depreciation is a non-cash business expense that is allocated and calculated over the period that an asset is useful to your business." You ask How? More info here: "Depreciation Concepts" - https://www.principlesofaccounting.com/chapter-10/depreciation-concepts/ https://www.principlesofaccounting.com/chapter-10/depreciati... example: https://www.myaccountingcourse.com/accounting-dictionary/images/depreciation-schedule-example.jpg https://www.myaccountingcourse.com/accounting-dictionary/ima... source: https://www.myaccountingcourse.com/accounting-dictionary/depreciation-schedule https://www.myaccountingcourse.com/accounting-dictionary/dep...
      - MichaelZuo 3y ago
        By these standards the pentagon will have sent $0 worth of stuff to Ukraine?
    - someotherperson 3y ago
      Not an accountant, might have issues: There are depreciation schedules in taxation that let you offset your tax. To this effect, 100% depreciation would expense the item (and thus reduce the taxable income). Because the tax doesn't represent 100% of the value you paid for the item, it doesn't mean that the item no longer with value.
    - johngladtj 3y ago
      Any scrap value you realize is recorded as profit
    - whinenot 3y ago
      Scrap has storage and disposal costs, especially for things that go boom. Giving old war machines and ordnance away is probably a huge expense reduction for all NATO donor countries.
blitzar 3y ago
I thought this was the idea all along... the announcements were all using as new sticker prices +r&d for the first manufacturing run on 20 year old hardware, it was a feature not a bug. Cynically this "accounting error" is either an excuse to send more hardware to achive the same absolute $$ cost, or a method of communicating that the "cost" to the taxpayer was much (much much) lower than it really was.

lookboil 3y ago

I'm old enough to remember the $2 trillion Pentagon accounting error announced by Rumsfeld the day before 9/11. Didn't hear much about that in the intervening years

ed 3y ago
For context https://www.metabunk.org/threads/debunked-rumsfeld-says-2-3-trillion-missing-from-the-pentagon.165/ https://www.metabunk.org/threads/debunked-rumsfeld-says-2-3-...
- snapcaster 3y ago
  Not very satisfying debunking, $2.3 trillion being untrackable implies many billions being stolen. Don't really think it had much to do with 9/11, just a huge fucking grift on the taxpayers
- djfobbz 3y ago
  [flagged]
  - ROTMetro 3y ago
    I too when presented with facts think to myself 'but who is the person who typed these all out'. Do you have anything specific about these facts that you disagree with, or are you just spreading FUD to spread FUD? Did you eat up all the Microsoft FUD around Linux in the past too?

dsq 3y ago

"You didn't think they actually spent ten thousand dollars for a hammer and thirty thousand for a toilet seat, did you?" Hopefully this is the explanation.