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The Accounting Tack That Makes PayPal’s Numbers Look So Good

2017-08-05 11 Dailymotion

The Accounting Tack That Makes PayPal’s Numbers Look So Good<br />But under PayPal’s alternative accounting, its non-GAAP operating income was $659<br />million in the June quarter, an increase of almost 25 percent from 2016.<br />Most of it — $192 million — was stock-based compensation PayPal dispensed to employees in the June quarter<br />and added back to its results as calculated under GAAP.<br />But then they took a new tack: Technology companies began providing alternative earnings calculations without such costs alongside results<br />that were accounted for under GAAP, essentially offering two sets of numbers every quarter.<br />How could stock-based compensation — which is a company expense, after all — have helped PayPal’s performance in the quarter?<br />Even better, PayPal’s favored earnings-per-share measure — which it does not calculate in accordance with generally accepted<br />accounting principles, or GAAP — came in at 46 cents per share, 3 cents more than Wall Street analysts had expected.<br />Back in the 1990s, technology companies argued strenuously against having to run stock compensation costs through their profit-and-loss statements.<br />As long as companies also showed their results under generally accepted accounting rules, the Securities<br />and Exchange Commission let them present their favored alternative accounting.

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