In what can only be described as an injustice to the American tax payer Facebook has released its financial statement and has admitted that even though the company will make roughly 1.4 billion dollars in pre tax profit they mysteriously will not owe the federal government anything. How is this possible is the obvious question and the answer is of course accounting gimmicks. Facebook appears to accomplish this in two ways. First, the company is allowed to bank losses from prior years. In other words, lets say Facebook hypothetically had a loss of 400 million in 2011. Then the following year they made 1.4 billion. They would then be able to subtract that loss in 2011 from their pre tax profit in 2012. The second way is that Facebook does this is explained below.
” Companies like Facebook are allowed to treat the cost of non-cash compensation, such as stock options, as an expense that reduces profits, essentially the way they treat cash compensation such as salaries.
The difference is that Facebook—unlike, say, General Motors (GM)—relies heavily on stock options and restricted stock units as a form of compensation. It paid out a lot during its years as a private company that it must now recognize on its income statement and balance sheet”
The original story goes on to mention that Facebook will not only pay no federal tax on its billion dollar plus profit but will in fact receive over 4oo million dollars in tax refunds. To say this is absurd is an understatement. I guess this gives us an idea why our government is broke. If you think this unfair hit the like button, lol.