Money

Uber, Lyft Use Accounting Tricks To Inflate Sales And Profits

News Reports
Posted on April 29, 2019
Both companies inexplicably assert their customers are not the passengers but the drivers, whom they classify for tax purposes as independent contractors. The TNCs’ definition of customer isn’t common. Typically, a customer is the one receiving the service and paying for it. It’s clear when a TNC user hits the app and gets his credit card charged at the end of a ride, he is the customer. (Flickr.com image)

Both companies inexplicably assert their customers are not the passengers but the drivers, whom they classify for tax purposes as independent contractors. The TNCs’ definition of customer isn’t common. Typically, a customer is the one receiving the service and paying for it. It’s clear when a TNC user hits the app and gets his credit card charged at the end of a ride, he is the customer. (Flickr.com image)

An opinion article in the April 29 Wall Street Journal explains how Uber and Lyft distort reporting of discounts, incentives, and refunds to boost their revenue and profit figures.

Declaring these costs as marketing and drivers as customers, the transportation network companies skirt common categories of accounting. The riders are labeled "end-users."

From the article by Howard Schilit, CEO of Schilit Forensics and a co-author of “Financial Shenanigans”:

"In 2018 Lyft included $338.4 million of rider incentives and refunds in “marketing expenses.” Had it been treated as ordinary sales discounts, reported revenue would have been some 16% lower than the $2.16 billion disclosed. The same year Uber reported that $1.4 billion in “sales and marketing” was for consumer discounts, promotions and refunds. If treated as ordinary sales discounts, sales would have been 12% lower than the $11.27 billion reported. For both companies, reclassifying this spending as part of operating expenses inflates sales and sales growth."

Wall Street Journal article here [Note: This article is gated behind a subscriber paywall]

Related article: Why Uber Is Headed For A Crash

Related Topics: accounting, finance, Lyft, TNCs, Uber

News Reports News Reports
Comments ( 1 )
  • Anthony

     | about 3 months ago

    Ha jah!!! This will completely derail lyft stock and uber ipo The umsm department of wages should open an investigation into the different amounts a customer is told they are being charged and the different amount the poor uber driver is shown that is 99% not the same amount

More Stories