$TSLAQ One more sexy thread about accruals for the year just to give you that much more confidence going into deliveries and Q4 net income. PPE is the most normal account for companies. It is recorded at historical costs with some add-ons such as installation. (1/12)
$TSLAQ disclosures are not complete in PPE accounting especially for disposals and purchases. To understand changes, it takes multiple statements for purchases, disposal losses/gains, dep. expense, accumulated depreciation, and you still do not get the full picture. (2/12)
The sale/purchase of PPE involves this journal entry:
Cash (sale)
Historical Cost (purchase)
Accumulated Depreciation (sale)
Loss (sale)
Cash (purchase)
Historical Cost (sale)
Gain (sale)
Note Payable (purchase) (3/12)
Cash (sale)
Historical Cost (purchase)
Accumulated Depreciation (sale)
Loss (sale)
Cash (purchase)
Historical Cost (sale)
Gain (sale)
Note Payable (purchase) (3/12)
I know the loss and the accumulated depreciation changes. The cash from sales are netted from acquisition of other equipment. So I had to modify into this: (4/ )
PPE Historical Costs Net Change
Accumulated Depreciation Variance – (Change in Accumulated Depreciation less Depreciation Expense)
Loss
Cash
Notes Payable
Gain (5/12)
Accumulated Depreciation Variance – (Change in Accumulated Depreciation less Depreciation Expense)
Loss
Cash
Notes Payable
Gain (5/12)
Its not perfect but it gives me an estimate of the purchases and sales for Q22019. It should have a reasonable variance. But not this for Q2: (6/12 )
PPE Historical Cost Change 562m
Loss on Sale 29m
Accumulated Dep Variance 6m
Cash 278m
N/Pay 88m
Unknown 231m (7/12)
Loss on Sale 29m
Accumulated Dep Variance 6m
Cash 278m
N/Pay 88m
Unknown 231m (7/12)
They did purchase Maxwell in Q2 which according to the K explains $26m of FMV adjustment due to acquisition accounting. So we are down to $205m of PPE change that is unexplained. Of an account that is recorded at historical costs. Everyone get the idea now? (8/12)
Let’s do it for Q32019: (9/12)
PPE His Cost Change 388m
Loss on Sale 21m
Accum Dep Variance 73m
Cash 407m
N/Pay 0m
Unknown 75m (10/12)
Loss on Sale 21m
Accum Dep Variance 73m
Cash 407m
N/Pay 0m
Unknown 75m (10/12)
Do you own a stock in a company where you think – I really need to reconcile fixed assets. They look at little off. It took 60 minutes digging around their Q’s to get these numbers. The are off by 41% in Q2 and 20% in Q3. (11/12)
The rational explanation is conversion of inventory into demos for test driving. At a $45k unit cost it is 6,200 units over two quarters or 3.4% of production. Which does not sound very reasonable but neither does gate delivered. (12/12)
