Thread by @bbm010

@PlugInFUD $TSLAQ Elmer, each time I work through ASC 606-10-55-23 (Sales with rights of return,) you refer me back to the guaranteed residuals sections of the Q and K's. So here is a little background before I work the numbers.
(1 of 11)

Revenue Recognition standard was changed effective 1/1/2019. Companies are now allowed to recognize revenues with a right of return period provided that a reasonable estimate can be made of the returns. (2 of 11)

The journal entry looks like this:
Accounts Receivable
Allowance for Sales Returns
Revenue

This gives us two major accounts that cause heart burn: Revenues and A/rec. (3 of 11)

Here are the running balances if the Allowance for Sales Returns since Q1 2018 (it is included in other accruals) Tesla early adopted the standard for 2018:
Q12018 - 86,359
Q22018 - 78,575
Q32018 - 78,387
Q42018 - 84,143
Q12019 - 524,222
Q22019 - 577,914 (4 of 11)

$TSLAQ fully disclosed all accruals in Q1&Q2 of 2019:
Q Quarter Reserve COGS Gross Margin Gross %
Q12019 500,500 408,800 91,700 18.32
Q22019 64,100 49,600 14,500 22.62
(5 of 11)

Using the end of year balance from Q42018, $71,829 of vehicles have been returned in FYE 2019. Most likely from the 7 day return policy started at the end of Q12019. But what about the remaining $577m? (6 of 11)

Big Bath/Kitchen Sink accrual party of Q1 may explain it. But this hit net income for $91m and made ASP calculations from the income statement horrendous. ZEV credits were in auto revenues in Q1 without disclosure in the conference call. Jonas had a meltdown over it. (7 of 11)

Accounts receivable have been out of balance with sales since Q42019. Here are the quarterly totals:
Q3 - 569,874
Q4 - 940,022
Q1 - 1,046,945
Q2 - 1,147,010
Sales did increase over this period. But did they increase 65% from Q3 to Q4? (8 of 11)

I think the immaculate Q4 numbers were juiced by a bulk sale that has not been collected and is in dispute. 10K did not report credit concentration >10% in Q4. Q2 did. Remember the Chinese sign in times square @BradMunchen (9 of 11)

This is now fully FUD vs above. PwC may have excluded this in EOY audit but forced correction into Q12019 without a restatement of 2018 F/S. The $500m revenues/Arec would be bellow typical materiality of 2.50% of sales for companies reporting a loss. (10 of 11)

Which now brings us to the margins. Combined Auto and Lease Sales with ZEV reported a 16% margin vs their 18% for Q1. Q2 Combined auto and leasing sales was 19.6% with ZEV. My only conclusion is someone is smoking more than kush to find 18% in Q1 and 22% in Q3. (11 of 11.)