W17544

TESLA’S NON-GAAP ACCOUNTING MEASUREMENTS: REVENUE

RECOGNITION AND STOCK-BASED COMPENSATION 1

Professors Martin E. Persson and Mitch Stein wrote this case with the assistance of Spencer Higgs solely to provide material for
class discussion. The authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors
may have disguised certain names and other identifying information to protect confidentiality.

This publication may not be transmitted, photocopied, digitized, or otherwise reproduced in any form or by any means without the
permission of the copyright holder. Reproduction of this material is not covered under authorization by any reproduction rights
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University, London, Ontario, Canada, N6G 0N1; (t) 519.661.3208; (e) [email protected]; www.iveycases.com.

Copyright © 2017, Richard Ivey School of Business Foundation Version: 2017-08-24

American automaker Tesla Motors Inc. (Tesla) issued its 2014 third quarter report and letter to
shareholders in November 2014. Christine Andersen, an analyst at a boutique investment firm, was asked
to perform due diligence on a potential investment in Tesla. Specifically, she was tasked with evaluating
the quality of the company’s most recent quarterly earnings. Andersen had become wary of the earnings
detailed in the report after reading an investment advice article that stated, “Though we love the car and
the passion of the firm and its [chief executive officer] CEO, we continue to be concerned about the
economics of Tesla’s business and the quality of its earnings.” 2

As Andersen examined the article further, she noticed that the author’s concerns related to differences
between the financial performance reported under U.S. generally accepted accounting principles (GAAP)
and the financial performance reported under Tesla’s own non-GAAP measurements. The first concern
involved the company’s non-GAAP treatment of revenue from the sales of cars under its resale value
guarantee program. 3 The second concern, related to the first, involved the revenue recognition of sales of
regulatory credits under state environmental programs. Anderson noted that the third concern outlined by
the authors was the controversy surrounding the non-GAAP reporting of the company’s stock-based
compensation for its employees. She questioned the reasonableness of these adjustments, and wondered
whether the resulting figures could mislead investors.

Andersen acknowledged that there might be a perfectly plausible explanation for Tesla’s use of non-
GAAP measurements. Companies were required to issue financial statements in accordance with U.S.
GAAP standards to list their company on stock exchanges in the United States. However, it was common
for those companies to also provide their own measurements of performance to investors, especially in

1
This case has been written on the basis of published sources only. Consequently, the interpretation and perspectives
presented in this case are not necessarily those of Tesla Motors Inc. or any of its employees.
2
David Milstead, “Tesla’s Financials: A Peek under the Hood,” Globe and Mail, October 2, 2013, accessed July 4, 2017,
www.theglobeandmail.com/globe-investor/investment-ideas/tesla-financials-a-peak-under-the-hood/article14668932/.
3
Tesla’s resale value guarantee program was a financing program that guaranteed customers the option of selling their
vehicles back to the company.

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areas where the companies felt that conventional reporting standards failed to capture the underlying
economic activities of their business. The caveat, however, was that these measurements should not be
given greater emphasis than those provided under U.S. GAAP standards. One of the big four accounting
firms 4 noted that companies were required to “give equal or greater prominence to the most comparable
GAAP measures, ensure that appropriate disclosures are provided, accurately label the non-GAAP
measures, and identify an adjustment as non-recurring only if that is the case.” 5

Andersen was not sure that Tesla met these criteria. She noted that the company’s third quarter
shareholder letter from 2014 provided the following rationale for its non-GAAP measures:

Non-GAAP financial measures also exclude the impact of lease accounting on related revenues
and cost of revenues associated with Model S deliveries with the resale value guarantee and
similar buy-back terms, as this perspective is useful in understanding the underlying cash flow
activity and timing of vehicle deliveries. 6

She considered Tesla’s explanation as she began her research.

TESLA MOTORS INC.

To understand more about Tesla’s business and the appropriateness of its non-GAAP measurements,
Andersen began to research the company’s history. A group of engineers had founded the company in
Silicon Valley, California, in 2003. Its current CEO, Elon Musk, had joined the company in 2004 as its
main financial backer and chairman. Musk had brought along a wealth of experience from his time as one
of the entrepreneurs behind several successful start-up businesses including PayPal Holdings, Inc. and
Space Exploration Technologies Corporation.

Tesla released its first fully electric vehicle, the Roadster, in 2008. 7 The Roadster could drive about 395
kilometres on a single charge and retailed for US$109,000. 8 Unlike traditional cars that were sold through
local dealerships, the Roadster could only be purchased directly from Tesla. This allowed the company to
avoid paying the traditional dealership margin on the selling price and to pass on those savings to the final
consumer. But even with these potential savings and the rather steep retail price, the Roadster was
foremost a proof of concept, and the company continued to make a loss on each one sold.

Tesla issued its initial public offering in 2010 priced at $17 per share. The stock increased over 40 per
cent in the first day of trading, implying that a market capitalization of over $2 billion was likely. 9
Andersen noted that there had also been a tremendous increase in the company’s share price since the

4
The big four accounting firms were Deloitte Touche Tohmatsu Limited, PricewaterhouseCoopers, Ernst & Young, and
Klynveld Peat Markwick Goerdeler (KPMG).
5
Patrick Higgins and Kevin Garry, “SEC Updates Interpretative Guidance on Non-GAAP Financial Measures,”
PricewaterhouseCoopers, 2016, accessed July 25, 2017, www.pwc.com/us/en/cfodirect/publications/in-brief/sec-non-gaap-
financial-measures.html.
6
Tesla Motors Inc., Third Quarter 2014 Shareholder Letter, November 5, 2014, accessed November 9, 2015,
http://files.shareholder.com/downloads/ABEA-4CW8X0/0x0x791902/D7B8CC04-9C3E-4216-9CE3-
7FB4D7E0C00B/Q314_SHL_Final.pdf, 5.
7
Erik Gregersen and Barbara A. Schreiber, “Tesla Motors,” Encyclopaedia Britannica, accessed November 9, 2015,
www.britannica.com/topic/Tesla-Motors.
8
All currency amounts are in US$ unless otherwise specified.
9
Jonathan Spicer and Poornima Gupta, “Carmaker Tesla’s Stock Zooms 40 Percent on First Day,” Reuters, June 29, 2010,
accessed November 9, 2015, www.reuters.com/article/us-tesla-ipo-idUSTRE65R2B620100629.

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initial public offering. At the time of the company’s 2014 earnings announcement, the stock had risen to
over $242 per share, with a market capitalization of over $30 billion. 10

A major operational shift occurred in 2012, when production of the Roadster was ceased to make way for
the new Model S. 11 The Model S offered increased speed and extended travel range—it was able to travel
over 500 kilometres on a single charge. Tesla’s new model could go from 0 to 100 kilometres per hour in
less than three seconds. As such, the Model S was considered a technological breakthrough in the car
industry and a potential major revenue driver. However, when Andersen looked at the company’s
financial performance, she noted that it had continued to struggle in turning a profit under conventional
financial reporting practices. The most recent financial statements showed a loss of almost $75 million
using U.S. GAAP standards, compared to a profit of over $5 million in non-GAAP standards (see Exhibit
1). She knew that the company’s share price was being driven by expectations of future growth, but she
was concerned that the non-GAAP results might also be distorting investors’ views of the company’s
prospects.

GAAP and Non-GAAP Reporting

Andersen looked at the $80 million difference between Tesla’s GAAP and non-GAAP earnings and
wondered how the different measurement rules could create such a large discrepancy. She concluded that
the company saw a major shortcoming in the way that GAAP treated its revenue and expenses. To gain
further insight into the company’s accounting practices, she decided to examine more carefully how Tesla
calculated its loss under GAAP and profit under non-GAAP. Starting with the company’s income
statement prepared under GAAP (see Exhibits 1 and 2), she began to make the adjustments necessary to
reconcile the GAAP loss of $74.7 million with the non-GAAP income of $4.6 million.

REVENUE RECOGNITION

Resale Value Guarantee Program

The first adjustment related to Tesla’s resale value guarantee program—referred to as a buyback
commitment—which Tesla explained as follows: “Model S customers have the option of selling their
vehicle back to [Tesla] during the period of 36 to 39 months after delivery for a pre-determined resale
value.” 12 Andersen then found more details in an Ernst & Young report: “Under [GAAP], given the lack
of a transfer of risks and rewards under the buy-back commitment, such transactions generally do not
qualify for immediate revenue recognition as a vehicle sale, but are accounted for as leases.” 13

This meant that, under GAAP, Tesla would report sales for which there was a buyback guarantee as a
lease, recognizing only a portion of the revenue each year, and deferring the remainder of the revenue on
its balance sheet as a liability. Andersen noted, however, that in calculating its non-GAAP income, the
company reported the amount of deferred revenue under GAAP as revenue on the income statement. This
caused the amount of revenue and corresponding net income reported under non-GAAP to be higher than
the amount reported under GAAP.

10
“Historic Stock Lookup: Adjusted Historic Prices for the Week of November 3, 2014,” Tesla Motors Inc., accessed
November 9, 2015, http://ir.tesla.com/stocklookup.cfm?historic_Month=11&historic_Day=7&historic_Year=2014.
11
Gregersen and Schreiber, op. cit.
12
Tesla Motors Inc.: Form 10-Q for the Quarter Ended September 30, 2014, United States Securities and Exchange
Commission, accessed November 9, 2015, http://ir.tesla.com/secfiling.cfm?filingID=1193125-14-403635, 9.
13
Ernst & Young, Drive for the Global GAAP: An Automotive Industry Comparison of US GAAP and IFRS 2008, accessed
November 9, 2015, www.ey.com/Publication/vwLUAssets/Automotive_sector_comparison_of_US_GAAP_and_IFRS/$FI
LE/Industry_Automotive_Drive_for_the_Global_GAAP.pdf, 8.

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To determine the difference between Tesla’s GAAP and non-GAAP revenues, and the cost of revenues,
Andersen consulted a note to the financial statements. The note explained the changes in the company’s
various accounts relating to the resale value guarantee (see Exhibit 3). Under GAAP, there was an
increase in amounts to be reported as liabilities on the balance sheet of approximately $28.3 million (as
deferred revenue) and $52.5 million (as resale value guarantee liability). However, for its non-GAAP
statements, the company reported these amounts as revenue, resulting in an increase in revenue of $80.8
million. This increase in revenue was reduced by a corresponding increase in the cost of sales of $62.9
million, which had been reported as an increase to assets (as the resale value guarantee program) under
GAAP (see Exhibit 3). Andersen wondered to what extent these modified numbers reflected the
company’s actual performance.

In addition to highlighting these differences, Andersen’s investigation led her to wonder how the
company recognized revenue with respect to the regulatory credits that the company earned by
manufacturing zero-emission vehicles (ZEV).

Tesla and Regulatory Credits

As a manufacturer of ZEVs, Tesla earned tradable regulatory credits in states such as California, which
required a certain percentage of vehicles delivered to be ZEVs or partial-emission vehicles (see Exhibit
4). 14 The company could then sell these credits based on the cap and trade policies of local government
agencies—the most significant being the Air Resource Board of California’s Environmental Protection
Agency. Automakers such as Honda Motor Co., Ltd., General Motors Company, and Volkswagen did not
meet these standards, so they had to purchase additional credits. However, companies such as Tesla did
not need these credits at all, so they sold them as they were earned (see Exhibits 5 and 6). 15

Andersen found that the sale of regulatory credits had a substantial impact on Tesla’s revenue. 16 A note in
the quarterly financial statements for the quarter ending September 30, 2014, stated that Tesla
“recognized $76.1 million in ZEV credit sales as a result of one-time contracts with various OEMs
[original equipment manufacturers].” 17 The company also sold $16.7 million in other regulatory credits.

Given the significance of regulatory credit sales on Tesla’s revenue and profitability, Andersen sought to
better understand the regulatory climate surrounding these credits and how the company reported them on
its financial statements. She found guidance from one of the big four accounting firms that supported the
reporting of the cost of the credits to the company as nil. 18 Based on this guidance, Tesla recorded the sale
of credits from the sale of cars as revenue, with no corresponding cost, because the credits were granted
free of charge by local government agencies.

Andersen wondered how the reporting of revenue from the sales of these credits as automotive sales
affected Tesla’s margins and ratios (see Exhibit 7). She was especially curious because the sale of
regulatory credits was a non-essential aspect of the company’s core business, and there was no guarantee
that the current regulatory scheme would continue indefinitely. In fact, there was already some evidence

14
ZEVs included battery electric and fuel-cell vehicles.
15
Tesla Motors Inc., FORM 10-K (Annual Report) Filed 02/26/14 for the Period Ending 12/31/13, accessed November 9,
2015, http://files.shareholder.com/downloads/ABEA-4CW8X0/2330621879x0xS1193125-14-69681/1318605/filing.pdf, 17.
16
For example, in 2013, Tesla recognized $129.8 million in ZEV credits with over 90 per cent realized in the first half of the
year; Tesla Motors Inc., Form 10-Q for the Quarterly Period Ended September 30, 2014, op. cit., 25.
17
Tesla Motors Inc., Form 10-Q for the Quarterly Period Ended September 30, 2014, op. cit.
18
There were two suggested models for reporting emission credits: the intangible asset model and the inventory model.
Under either model, credits furnished by the government, as in the case of Tesla, were recorded at zero cost; “Accounting
Guidance for Emissions Programs,” Ernst & Young, accessed November 9, 2015, www.ey.com/US/en/Industries/Oil---
Gas/Carbon-market-readiness---4---Accounting-guidance-for-emissions-programs.

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that these policies might undergo some changes. On April 3, 2014, California changed the rules for ZEV
credits, causing Tesla to qualify for only four credits per Model S sold, down from seven credits. 19
Because these credits sold for approximately $5,000 each, she calculated that the change could cost the
company as much as $15,000 per Model S sold. 20

Tesla’s reporting of these credits was permissible under GAAP. However, given the non-essential nature
to the company’s core business and the uncertainty surrounding these credits, she wondered if they should
be reported as a separate “other income” line, instead of being reported as part of automotive sales on the
income statement.

How Tesla recognized different types of revenue was not the only area of contention surrounding the
company’s accounting policies. Another area was the non-GAAP treatment of stock-based compensation.
Andersen picked up the company’s quarterly report and opened it to the page discussing stock-based
compensation.

STOCK-BASED COMPENSATION

Andersen understood that stock-based compensation was designed to align employees’ interests with
those of the firm by motivating employees to engage in activities that maximized the firm’s financial
performance. Unlike compensation such as salary and bonuses, stock options did not require an
immediate cash outlay by the company. 21 However, it seemed to her that the issuance of stock options
still represented a cost to the company and its shareholders. Andersen noted that Tesla adjusted its GAAP
statements by adding back an amount of $39.2 million in stock-based compensation for the quarter ending
September 30, 2014, to calculate its non-GAAP net income (see Exhibit 8).

Andersen also found the allocation of stock options inconsistent with the company’s focus on innovation
and technology. The company allocated a larger part of its stock-based compensation to selling, general,
and administrative expenses ($17.1 million) than to research and development ($16.6 million), with the
remainder allocated to cost of sales ($5.4 million). Engineers in research and development were the
company’s value drivers, she thought, so why did they have a smaller share of stock-based allocation?

DECISION

After reviewing all of the information, Andersen knew that she would likely be working over the
weekend to answer various related questions: Was it reasonable to state that Tesla had been profitable in
the third quarter of 2014? Were Tesla’s non-GAAP adjustments appropriate? 22 How could the
adjustments between Tesla’s GAAP and non-GAAP numbers be explained? What would Tesla’s
performance look like if she adjusted the financial statements for the resale value guarantee, regulatory
credits, and stock-based compensation?

19
Alan Ohnsman, “Tesla to Get Fewer Eco Credits as California Tweaks Rules,” Bloomberg, 2014, accessed November 9,
2015, www.bloomberg.com/news/articles/2014-04-04/tesla-to-get-fewer-eco-credits-as-california-tweaks-rules.
20
Christopher Knittel, “California's Auto-Emissions Policy Hits a Tesla Pothole,” Wall Street Journal, 2014, accessed
November 9, 2015, www.wsj.com/articles/SB10001424052702303650204579376801103200852.
21
Stock-based compensation also helped preserve cash because no cash was used when a stock option was issued or
exercised. An exception to this rule occurred when employees exercised stock options in a company that was holding no
treasury shares, forcing the company to purchase its own shares from the open market.
22
See the Note to Exhibit 1 for details about an additional add-back, which explains the discrepancy in interest figures on
the GAAP and non-GAAP statements.

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EXHIBIT 1: TESLA MOTORS INC. INCOME STATEMENT (IN US$ THOUSAND)

Quarter Ended
September 30, 2014
GAAP Non-GAAP
Revenues
Automotive sales $849,009 $929,853
Development services 2,795 2,795
Total revenues 851,804 932,648
Cost of revenues
Automotive sales 598,472 655,978
Development services 1,481 1,481
Total cost of revenues 599,953 657,459
Gross profit 251,851 275,189
Operating expenses
Research and development 135,873 119,234
Selling, general, and administrative expenses 155,107 137,971
Total operating expenses 290,980 257,205
Income/(loss) from operations (39,129) 17,984
Other income and interest expense (31,852) (9,692)
Loss before income taxes (70,981) 8,292
Provision for income taxes 3,727 3,727
Net income/(loss) ($74,708) $4,565

Note: Tesla adds back $22,160 in non-cash interest expense related to some of their convertible notes. The “Other income
and interest expense” line in this exhibit reflects this adjustment as the difference in amounts between GAAP and Non-
GAAP; some figures were modified by the case authors for teaching purposes.
Source: Non-GAAP figures are from the case authors’ analysis; Tesla Motors Inc., Third Quarter 2014 Shareholder Letter,
November 5, 2014, accessed December 5, 2015, http://files.shareholder.com/downloads/ABEA-
4CW8X0/0x0x791902/D7B8CC04-9C3E-4216-9CE3-7FB4D7E0C00B/Q314_SHL_Final.pdf, 6, 9; Tesla Motors Inc., Form
10-Q for the Quarterly Period Ended September 30, 2014, United States Securities and Exchange Commission, accessed
November 9, 2015, http://ir.tesla.com/secfiling.cfm?filingID=1193125-14-403635, 5.

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EXHIBIT 2: TESLA MOTORS INC. BALANCE SHEET (IN US$ THOUSAND)

Quarter Ended
September 30, 2014
Assets
Current assets
Cash and cash equivalents $2,370,735
Restricted cash and marketable securities 17,331
Accounts receivable 156,889
Inventory 752,492
Prepaid expenses and other current assets 65,467
Total current assets 3,362,914
Operating lease vehicles, net 617,743
Property, plant, and equipment, net 1,404,326
Other assets 52,550
Total assets $5,437,533
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable $649,362
Accrued liabilities 194,571
Deferred revenue 161,570
Capital lease obligations, current portion 9,592
Customer deposits 227,056
Convertible senior notes 597,626
Total current liabilities 1,839,777
Capital lease obligations, less current portion 12,806
Deferred revenue, less current portion 254,321
Convertible senior notes, less current portion 1,786,635
Resale value guarantee 397,742
Other long-term liabilities 125,997
Total liabilities 4,417,278
Convertible senior notes 62,161
Stockholders’ equity
Common stock 125
Additional paid-in capital 2,284,010
Accumulated deficit (1,326,041)
Total stockholders’ equity 958,094
Total liabilities and stockholders’ equity $5,437,533

Source: Tesla Motors Inc., Form 10-Q for the Quarterly Period Ended September 30, 2014, United States Securities and
Exchange Commission, accessed November 9, 2015, http://ir.tesla.com/secfiling.cfm?filingID=1193125-14-403635, 4.

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EXHIBIT 3: TESLA MOTORS INC. RESALE VALUE GUARANTEE (IN US$ THOUSAND)

Quarter Ended
September 30, 2014
Beginning operating lease vehicles under the resale value guarantee program $515,780
Net increase in operating lease vehicles under the resale value guarantee program 62,889
Ending operating lease vehicles under the resale value guarantee program 578,669
Beginning deferred revenue related to Model S deliveries 305,277
Net increase in deferred revenue related to Model S deliveries 28,294
Ending deferred revenue related to Model S deliveries 333,571
Beginning resale value guarantee liability 345,192
Net increase in resale value guarantee 52,550
Ending resale value guarantee liability 397,742

Note: “Net increase in operating lease vehicles” is not recognized in automotive cost of sales; “Net increase in deferred
revenue” is not recognized in automotive sales; “Net increase in resale value guarantee” is not recognized in automotive sales.
Source: Tesla Motors Inc., Form 10-Q for the Quarterly Period Ended September 30, 2014, United States Securities and
Exchange Commission, accessed November 9, 2015, http://ir.tesla.com/secfiling.cfm?filingID=1193125-14-403635, 9.

EXHIBIT 4: CALIFORNIA ZERO-EMISSION VEHICLE CREDIT BALANCES

(AS OF SEPTEMBER 30, 2014)

Manufacturer Zero-emission vehicles

Nissan Motor Company Ltd. 1,383
Honda Motor Company 1,077
Toyota Motor Corporation 856
General Motors Company 613
Chrysler Group LLC 528
Tesla Motors Inc. 222
Ford Motor Company 198
Mercedes Benz 140
Subaru Corporation 108
Jaguar Land Rover
75
Automotive PLC
Volkswagen 42
BMW 24
Hyundai Group 31
KIA Motor Corporation 9
Mitsubishi Corporation 2
Total 5,308

Notes: California’s Air Resources Board expresses credits in units of grams per mile Non-Methane Organic Gases (g/mi
NMOG); neighbourhood electric vehicle credits are excluded from the quantities listed in this exhibit.
Source: “2013 Zero Emission Vehicle Credits,” October 17, 2014, California Environmental Protection Agency, Air Resource
Board, accessed November 9, 2015, www.arb.ca.gov/msprog/zevprog/zevcredits/2013zevcredits.htm.

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EXHIBIT 5: CALIFORNIA ZERO-EMISSION VEHICLE CREDIT TRANSFERS IN

(OCTOBER 1, 2013 TO SEPTEMBER 30, 2014)

Transferee Type of Vehicle Number of Credits

Mercedes Benz PZEV 664
Honda Motor Company ZEV 543
Chrysler Group LLC ZEV 238
Fuji/Subaru Corporation ZEV 108
Jaguar Land Rover Automotive PLC PZEV 39
General Motors Company ZEV 4
Volkswagen ZEV 2
Total 1,598

Note: California’s Air Resources Board expresses credits in units of grams per mile Non-Methane Organic Gases (g/mi
NMOG); PZEV = partial zero-emissions vehicle
Source: “2013 Zero Emission Vehicle Credits,” October 17, 2014, California Environmental Protection Agency, Air Resource
Board, accessed November 9, 2015, www.arb.ca.gov/msprog/zevprog/zevcredits/2013zevcredits.htm.

EXHIBIT 6: CALIFORNIA ZERO-EMISSION VEHICLE CREDIT TRANSFERS OUT

(OCTOBER 1, 2013 TO SEPTEMBER 30, 2014)

Transferor Type of Vehicle Number of Credits

Nissan Motor Company Ltd. PZEV 664
Tesla Motors Inc. ZEV 650
Fiat Chrysler Automobiles NV ZEV 235
Ford Motor Company PZEV 39
CODA Automotive Inc. ZEV 6
Polaris Industries ZEV 3
Mitsubishi Corporation ZEV 1
Total 1,598

Note: California’s Air Resources Board expresses credits in units of grams per mile Non-Methane Organic Gases (g/mi
NMOG).
Source: “2013 Zero Emission Vehicle Credits, 2014,” California Environmental Protection Agency, accessed November 9,
2015, www.arb.ca.gov/msprog/zevprog/zevcredits/2013zevcredits.htm.

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EXHIBIT 7: FINANCIAL RATIOS USING GENERAL ACCEPTED ACCOUNTING PRACTICES

Quarter Ended
September 30, 2014
Gross margin 29.6%
Operating margin (4.6%)
Net margin (8.8%)
Current ratio 1.8x
Quick ratio 1.4x

Source: Created by case authors using data from Tesla Motors Inc., Form 10-Q for the Quarterly Period Ended September
30, 2014, United States Securities and Exchange Commission, accessed November 9, 2015,
http://ir.tesla.com/secfiling.cfm?filingID=1193125-14-403635, 20.

EXHIBIT 8: STOCK-BASED COMPENSATION ALLOCATION (IN US$ THOUSAND)

Quarter Ended
September 30, 2014
Cost of sales $5,383
Research and development 16,639
Selling, general, and administrative expenses 17,136
Total $39,158

Source: Tesla Motors Inc., Form 10-Q for the Quarterly Period Ended September 30, 2014, United States Securities and
Exchange Commission, accessed November 9, 2015, http://ir.tesla.com/secfiling.cfm?filingID=1193125-14-403635, 20.

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