It almost always has to do with the details of EBITDA [1], in this case depreciations/writeoffs and amortized costs, especially if/when a bunch of funding may have been subsidized by governments along with healthy tax breaks [2].
It's related to a 1979 IRS case that says you have to destroy unsellable merchandise before you can write it off as a loss. This is why a lot of paperback books get shredded instead of sitting on a backlist.
https://en.wikipedia.org/wiki/Thor_Power_Tool_Co._v._Commiss...
This movie is IP, not a physical thing. Which leads to my question: suppose someone does leak it and the studio “destroys” it. Then the studio sues for copyright infringement and wins. Did they just commit retroactive tax fraud?
I hope so; the dump site will surely be found, and the movie will be rescued. I'm reminded of someone digging up a trove of ET cartridges for the Atari 2600 from the dump where they were disposed of.
That's not how fraud works and that's not what the IRS is trying to do
Fraud: you have to knowingly misrepresent your position aka lie about something. Making a mistake on your taxes is not fraud (source - I am a US citizen and have received letters from the IRS for making a mistake). It is definitely not fraud to be caught in unexpected IP theft.
IRS: they are not trying to get people in "gotcha" situations. They just want to collect the fair amount of revenue that people owe the federal govt and their punishment is proportional.
It's not absurd though. It actually works. Is it suboptimal and a bit confusing at times? sure. But man these internet people sure are watering down the meaning of the word "absurd".
It's like a tax lawyer saying that computer programming is "absurd". No sir, computer programming is based on sound principles of mathematics and linguistics.
The hypothetical that GP comment posed demonstrated that they didn't understand how tax collection and the IRS works.
>especially if/when a bunch of funding may have been subsidized by governments along with healthy tax breaks [2].
Does it matter? Realistically speaking the state only cares about the jobs that are created. Whether the movie is destroyed or not, the jobs have been created regardless. There's arguably the aspect of [famous movie] was made shot/produced/edited in [state], but I doubt many people care about where an animated comedy is produced.
EBITDA is nonsensical and it makes my brain implode when I realize how many investors utilize the metric. My brain turns into a black hole when I realize how many companies use it as an internal metric!
>EBITDA is nonsensical and it makes my brain implode when I realize how many investors utilize the metric
From wikipedia:
"EBITDA is widely used when assessing the performance of a company. EBITDA is useful to assess the underlying profitability of the operating businesses alone, i.e. how much profit the business generates by providing the services, selling the goods etc. in the given time period. "
There's plenty of ways that EBITDA can be misleading, but so can net income. Same goes with other statistics like the unemployment rate or GDP. They have flaws, but that doesn't mean they're "nonsensical and it makes [your] brain implode"
Yeah. It's a useful statistic in certain limited applications, but that is NOT how it's employed. It's grossly overused. Ignoring amortization and depreciation is like ignoring salaries, and the overuse of EBITDA can be directly traced to chronic and pathological underfunding of maintenance and supportability.
A good red flag for a statistic is when you see a couple dozen variants of the statistic being used interchangeably. Often at each All Hands Meeting. Oh, this month they're using EBITDA. Next month we're talking up EBITDAR. Who knows what the Overlords will be talking up four months from now? Something that makes the line go up, doubtless. Hopefully no one notices that barring buybacks, EPS has dropped under the table like a soused homecoming queen.
Amortization is incredibly important in a software company. Most software is going to be basically useless in 10 years time. Your company's Android app? There might not even be smartphones in 10 years.
And for something as complex as making software it papers over almost any meaningful understanding of how well a firm is operated.
That's what I mean about my head turning into a black hole. Management using such metrics internally is basically saying that they don't give a rat's ass about how much anything really costs.
As we've seen over the last year and a half, the chicken's come home to roost at some point. Rosy pictures are ripped to shreds by the actual cash flows.
Financial accounting is about where you've been for the last three months. Managerial accounting is about where you're going in the next three years. Our industry is firmly set on driving while only looking out the rearview mirror. I expect this to be changing rapidly at most software firms.
EBITDA says something about the profitability of the company's current offerings if all the corporate bullshit were amortized over time. It's a useful lens if you have a wildly profitable offering that doesn't look like it in a given accounting regime (Amazon for 10-20 yrs, intentionally), and it's a deceptive ploy to part investors from their money in other contexts.
No metric is perfect; in addition to asking how well a company meets a metric, take the time to ask what "meeting that metric" might mean and how that relates to your goals.