The Accounting Tack That Makes PayPal’s Numbers Look So Good
But under PayPal’s alternative accounting, its non-GAAP operating income was $659
million in the June quarter, an increase of almost 25 percent from 2016.
Most of it — $192 million — was stock-based compensation PayPal dispensed to employees in the June quarter
and added back to its results as calculated under GAAP.
But then they took a new tack: Technology companies began providing alternative earnings calculations without such costs alongside results
that were accounted for under GAAP, essentially offering two sets of numbers every quarter.
How could stock-based compensation — which is a company expense, after all — have helped PayPal’s performance in the quarter?
Even better, PayPal’s favored earnings-per-share measure — which it does not calculate in accordance with generally accepted
accounting principles, or GAAP — came in at 46 cents per share, 3 cents more than Wall Street analysts had expected.
Back in the 1990s, technology companies argued strenuously against having to run stock compensation costs through their profit-and-loss statements.
As long as companies also showed their results under generally accepted accounting rules, the Securities
and Exchange Commission let them present their favored alternative accounting.