Does anyone know what the observation was here that made this possible? Have Google's internal workloads not grown in size as quickly as they thought, or is this a "Moore's law is slowing down" thing?
I wonder if this was Google's response to the chip shortage? Maybe the cost/benefit (and just sheer inability to get certain parts) made them hold on to hardware for longer.
If Alphabet wanted to prove they lasted three years, they would have found a way to prove it. Auditors don't go around challenging on things like this. In particular, they don't go around challenging companies on depreciation because that is a key lever that management can pull if they need to hit numbers.
It is very difficult to discern exactly why they will have done this but the functional answer is: they have done this because they needed earnings to increase. In this case, it looks like the difference between a 15% and a 20% beat (I believe the change was made in January, I think they had quite a big beat in that quarter after some flattish momentum, middle of the year very strong anyway).
I worked in audit for several years and the auditors will challenge any estimate made by management that the auditors deem material to the financial statement readers. And the useful life of how long computers last is an estimate by management. While at most companies useful lives might not be an estimate worth looking at, Alphabet has enough computers for this to be a material estimate (likely due to GCP) that is subject to management bias. The public auditors are there to ensure (to a reasonable extent) that management can't manage earnings by changing estimates like this.
What you are seeing though is the trick they used to make 'net income' pop. Let's say they had a million servers and a server costs $5K each. When depreciated at 3 years that is $1.6 billion dollars a year of depreciation. But you stretch that out to 4 years and now its only $1.25 billion dollars in appreciation. Since depreciation is subtracted from revenue you just "bumped" up your revenue by $350M and you didn't have to do anything at all (except change how you treated your assets).
That they had to resort to this level of shenanigan to get their revenue numbers up is interesting to me.
No, you bumped your net income. Revenue is unaffected by the depreciation change. Revenue is up 61%.
Also, nobody would be fooled by an accounting trick like this. Analysts routinely compute EBITA, earnings before interest, taxes, and depreciation, exactly for this reason - filtering out the more purely financial/virtual expenses that are less informative for understanding the core business.
They likely did it because you're required to report things like depreciation in a way that reflects reality. There could be tax implications for instance, since you can count depreciation expenses against your taxable earnings (though often companies maintain separate depreciation accounting for financial reporting vs taxes due to the different rules for each).
When I was younger, I took an accounting class from Santa Clara University (it was part of their Executive MBA program although I did not get an MBA) because I knew that I'd like to start my own company some day and needed to know how accounting worked.
> Also, nobody would be fooled by an accounting trick like this.
The course specifically covered "accounting tricks" that would create the most favorable impression in the eyes of the public and in the eyes of the analyst community. Playing around with depreciation rates was one of them. The assertion in class (which I've never had a chance to test) was that the IRS rarely, if ever, cared about your depreciation tables. That was damn close to 20 years ago so it most certainly could be different now, and I am not a tax accountant. If it has changed since then I am sure someone who has taken the class will correct me.
I don't think it "fools" analysts, but I suspect they might trade on an understanding that retail investors might have a different take on what was reported than what the analysts read.
There are still Sandy Bridge CPUs available in GCE. Sandy Bridge came out in Q2 2011.
Density is an issue for people who are still renting from Equinix.
Why upgrade to the latest intel CPU when you get a paltry 100Mhz clock increase for the bother? May as well wait another year if 3 year old CPUs are pretty much the same performance as current models (give it take a few %)
Extending the life of an asset would affect the depreciation schedule, which would affect when depreciation is recognized / recorded on their books in a given tax year.
https://www.convergedigest.com/2021/07/google-extends-deprec...