Robert's Blog

Tesla announced its first ever quarterly profits of 26.2 million, but the company did not adhere to the GAAP principles when it released its financial statements. Under the GAAP, “Tesla Motors lost 30.5 million this past quarter.” This discrepancy occurs from Tesla’s loan scheme. The buyer takes out a loan and pays Tesla upfront, and the buyer owes the bank. Tesla takes a prospective stance by saying the car is sold, while GAAP states they are leasing the cars. Personally speaking, Tesla’s accounting principles are too speculative as Tesla’s loan contract also gives buyers the option to sell their car back after three years. This “buyback period” also artificially raises Tesla’s profits as they place a guaranteed value on their cars, increasing assets by 146.8 million. This number inflates the company as Tesla states they own the resale value of the car, even though the decision to sell the car belongs to the owner. Tesla’s accounting practices assume an unachievable scenario for the company, but the numbers have greatly improved consumer confidence, causing the stock to rise by 13%. In the long term, this trend will likely continue as currently Tesla cannot keep up with demand for its vehicles.

Source: http://www.theglobeandmail.com/globe-investor/investment-ideas/tesla-financials-a-peak-under-the-hood/article14668932/