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Comment by ChuckMcM | Hacker News Reader

No, computers typically have a service life of 5 years, but depreciating them faster gives you more loss to to write down against your income.

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.

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> Since depreciation is subtracted from revenue you just "bumped" up your revenue by ...

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).

Fair, it bumps net income not revenue.

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.

Looking at it from a naive point of view, could it just be an actual change in what they estimate to be the useful life of their servers? Accounting shenanigans for a (relatively) small bump in revenue seems not really worthwhile.

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