$TSLAQ Instead of having an accrual palooza, I will dribble these out as I have time and available information. The first account to be reviewed: Automotive Leasing Revenues. The remainder of the planet calls this Sales-Type Leasing (ASC 842.) (1/n)

GAAP allows revenue recognition if a manufacture or dealer leases the preponderance of useful life and economic value of inventory. Computer manufactures are significant users of this accounting treatment. The journal entries for this type of leasing are: (2/n)
The sales are the present value of the payments plus down payment. COGS is the cost of the equipment less the present value of the residual payment. (3/n)
The final receivable entry is the residual value added to the lease payment receivable to remove inventory from the financial statements. $TSLA classifies the lease receivable as an Operating Lease Vehicles, net on the balance sheet and they are subject to depreciation. (4/n)
The assumptions in the calculation that can be subject to manipulation: the implicit interest rate of the lease and the residual payments. Lower rates increase capitalization of the lease which gives higher revenues. Larger residual decreases cost of goods sold. (5/n)
I have done this calculation every quarter since 12/31/19 and posted on twitter. To simplify the understanding of the problem, I calculated the implicit rate of the leases. (6/n)
The down payments do not have a time value of money issue (I.E. – there is no time.) The future payments are TVM. Remember the revenue calculation? Present value of the lease payments plus down payment. (7/n)
Look at Q1 & Q2 2020. We can debate if a lease implicit rate of 1.29%, 1.93% or 3.20% are realistic (Q4 19, Q3 20 & Q4 20). But negative rates in Q1 & Q2? (8/n)
If you want a common sense validation, look at the number of units leased for those two quarters (6,104 & 4,806) compared to revenues (239m & 268m.) Yep, revenues increased in a period where the units leased fell. (9/n)
Which brings the most important point: someone went to the principles’ office in Q3. Equally important, I have no idea who the principle might be (SEC, Board or External Audit). (10/n)

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Great article from @AsheSchow. I lived thru the 'Satanic Panic' of the 1980's/early 1990's asking myself "Has eveyrbody lost their GODDAMN MINDS?!"


The 3 big things that made the 1980's/early 1990's surreal for me.

1) Satanic Panic - satanism in the day cares ahhhh!

2) "Repressed memory" syndrome

3) Facilitated Communication [FC]

All 3 led to massive abuse.

"Therapists" -and I use the term to describe these quacks loosely - would hypnotize people & convince they they were 'reliving' past memories of Mom & Dad killing babies in Satanic rituals in the basement while they were growing up.

Other 'therapists' would badger kids until they invented stories about watching alligators eat babies dropped into a lake from a hot air balloon. Kids would deny anything happened for hours until the therapist 'broke through' and 'found' the 'truth'.

FC was a movement that started with the claim severely handicapped individuals were able to 'type' legible sentences & communicate if a 'helper' guided their hands over a keyboard.