Tangled web: Playing games with Apple’s accounting games
Which is worse, Apple’s maybe too-clever accounting that keeps it from paying taxes on its foreign cash or pretending that cash might as well not even exist?
Writing for MarketWatch (catch phrase: “We watch it, but we don’t really understand it.”), Brett Arends warns that “Apple’s real cash pile is 99% smaller than you think.” (Tip o’ the antlers to Joel Teitelbaum.)
Arends sets the table with Apple’s cash hoard before deliberately trying to pull out the table cloth in such a way as to send the plates flying everywhere.
…if there’s anything you love more than your new iPhone 6s, it’s the huge $203 billion in spare cash that the company says is sitting in its bank accounts.
The company says it has this cash and cash equivalents (whatever that means) that it defines by so-called “accounting standards” that are practiced by basically every company everywhere but clever people like Arends who have seen They Live and have special Ray Bans can see beyond such tricks.
There’s just one problem: That spare cash is mostly an illusion…
Sure. As any American knows, foreign money is like Monopoly money, it’s basically worthless.
…even a shell game, as a new report has just confirmed.
CONFIRMED. This thing that we’ve been talking about for years, it’s now confirmed.
First, Apple’s nominal cash hoard includes an astonishing $181.1 billion held offshore in tax shelters to avoid paying Uncle Sam…
Most of it’s in Confederate scrip. True story.
As the CTJ report observes, Apple would have to pay about $59.2 billion in U.S. taxes if it tried to repatriate that money.
Uh, yeah, sure, if you assume that’s what they’d do, just repatriate it at the highest possible tax rate because Eddie Cue needs some new shirts. It’s not like they could invest it overseas or do anything else with it, it’s all got “YOUR FACE HERE” written under where the portrait should be, for God’s sake.
And that’s not the only bad news.
Oh, you mean your obtuse case of the financial chicanery vapors isn’t the only thing that’s rotten in Cupertino?!
Apple’s balance sheet also reveals that it owes $147.5 billion in debts, accounts payable and other liabilities…
And if you take the fake number that Arends made up earlier and subtract it from this number — because Apple apparently borrowed this money from a cartoon representation of a loan shark and he wants it back right now or some iPhones and iMacs and such might find theirselves accidentally-like shoved off some tables at some Apple Store, you know whaddahm sayin’? — then Apple has only a very small amount of cash instead of a large amount of cash and, oh, the professor would like to see you after class because you’re failing financial accounting.
This is not the first time Arends has competed on Stupid Accounting Tricks. Back in 2011 when Apple released the iPad 2, Arends complained that it was more expensive than the Motorola Xoom because you couldn’t buy an iPad 2 with a carrier “subsidy”. In other words, you couldn’t pay less for it up front but more for it in the long term so it was more expensive. If you have a terminal disease and only have six months to live, the Macalope guesses.
Last year he declared the Apple Watch a $30 billion flop because Apple’s stock dropped after the Watch announcement. That’s how things work, right? Every movement of a stock is a direct representation of a company’s announcements that day and nothing else like investors cashing in or global market movements or anything else that could possibly have factored in.
The Macalope is happy to entertain the concerns of Citizens for Tax Justice. Companies in the U.S. are treated like individuals but seem to get away with things that would get the rest of us audited into the stone age if we tried them. We can argue about how long Apple should be allowed to shelter that cash overseas but there's currently no reporting requirement that says they should discount it by the largest possible tax amount. And investors can read, they know what Apple's liabilities are. Apple is far from the only company not repatriating foreign profits, it’s simply being made an example of because it’s a wildly successful company. And that’s OK as a marketing tool to draw attention to these issues but Arends pouring his own patented brand of crazy sauce over the top and trying to make it seem like the company is somehow insolvent is not OK.