Tesla Warranty Expense: A Case Of Goodwill By The Auditors

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About: Tesla, Inc. (TSLA)
by: Montana Skeptic
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Montana Skeptic
Bonds, long-term horizon, portfolio strategy, contrarian
Summary

Ask any accountant and you’ll learn that automobile warranty expense is properly categorized as part of the cost of selling the vehicle.

Yet since Q2 of 2018, Tesla in many instances has allocated warranty expense to “Goodwill” and other non-warranty expense categories.

Why does that matter? Because it inflates both Tesla’s claimed gross margin and its reported net income.

A trove of documentation from lawsuits against Tesla suggests the misallocation is pervasive.

How do I know so much about warranty? I don't. I've collaborated on this with Twitter's Luis Carruthers (@orthereaboot), who gathered the data and did the analysis.

Our Guest Author

Today’s piece is based on the research of Luis Carruthers (not his real name), who at Twitter posts as @orthereaboot. If you want to learn more about his education, background, and experience,