Skip to main content

Tesla gets a slap on the wrist from the SEC over accounting method

tesla montreal

Tesla critics have often complained about the company’s use of non-GAAP metrics in its quarterly financial results. While the company claims that it better represents its financial situation than the Generally Accepted Accounting Principles (GAAP), detractors say the method embellishes Tesla’s financial statements.

The company stopped using the method since last quarter and now the Wall Street Journal came out with a report suggesting that the SEC was behind the change.

WSJ obtained correspondence between Tesla and the SEC from mid-September to mid-October that showed the automaker and the regulatory agency arguing over the new accounting guidelines.

The regulator criticized Tesla for failing to make a “substantive” case for providing non-GAAP figures to investors. In a letter dated Sept. 23, the SEC picked apart Tesla’s prior response that its management uses non-GAAP information internally. The regulator pointed out rules that require “a statement disclosing the reason why you believe that the presentation of a non-GAAP financial measure provides useful information to investors…not how your management uses the information.”

The main differences in Tesla’s GAAP and non-GAAP accounting was the exclusion of stock-based compensation from the results, which is widespread in the industry, and the appropriation of cars sold with the resale value guarantee under a lease accounting standard. Considering Tesla ended its resale value guarantee program earlier this year, it has become much less of a problem, but the SEC referred to Tesla’s representation as ‘tailored’.

Apparently, there’s no real consequence to the SEC’s disapproval of Tesla’s accounting and the agency currently considers the matter to be resolved.

FTC: We use income earning auto affiliate links. More.

Stay up to date with the latest content by subscribing to Electrek on Google News. You’re reading Electrek— experts who break news about Tesla, electric vehicles, and green energy, day after day. Be sure to check out our homepage for all the latest news, and follow Electrek on Twitter, Facebook, and LinkedIn to stay in the loop. Don’t know where to start? Check out our YouTube channel for the latest reviews.

Comments

Author

Avatar for Fred Lambert Fred Lambert

Fred is the Editor in Chief and Main Writer at Electrek.

You can send tips on Twitter (DMs open) or via email: fred@9to5mac.com

Through Zalkon.com, you can check out Fred’s portfolio and get monthly green stock investment ideas.