surfside
Member
Based on my understanding, I don't think you got the first part right -- when SolarCity is building a new system, the installation and panel costs are capitalized (they show up in the cash flow statement as capex), not expensed. Revenues and expenses are then recognized over the life of the lease.Trying to summarize for my own benefit the nci situation based on what I (hope) I learned from the above.
Solarcity records short term losses on certain sales since they are essentially (kind of) leases : costs come (mainly) at installation while revenue trickles in over the lifetime of the product. SolarCity spins bundles of these installations in special variable interest entities (vie). Therefore these entities will also show a short term loss over the very first year as the installation costs get charged to the costs side of the balance sheet in the short term and are expected to generate longer term profits as revenue continues to trickle in.
Is the above a correct summary of the situation?
Here is the language from the 10-K re: how these costs flow through the financials:
Presentation of Cash Flows Associated with Solar Energy Systems
The Company classifies cash flows associated with solar energy systems in accordance with ASC 230, Statement of Cash Flows. The Company determines the appropriate classification of cash payments related to solar energy systems depending on the activity that is likely to be the predominant source of cash flows for the item being paid for. Accordingly, the Company presents payments made in a period for costs incurred to install solar energy systems that will be leased to customers, including the payments for cost of the inventory that is utilized in such systems, as investing activities in the consolidated statement of cash flows. Payments made for inventory that will be utilized for solar energy systems that will be sold to customers are presented as cash flows from operations in the consolidated statement of cash flows.