Steve Jobs' Quandry: Airplane Tax Classification
The difference in the classification for reporting purposes is amazing. Experts say shareholders and financial analysts usually give more importance to recurring operations, which typically are the day-to-day activities.
Because of this concept, Apple and KPMG chose to classify that gift of the Gulfstream V jet as a non-recurring expense. As a result, Apple reported operating income of $178 million or $1/share, an amount much greater than the expected 89 cents per share.
Some say the jet is a recurring expense since it is part of Jobs' compensation (bonus) package. Although a gift of a jet might not seem like a big deal, the difference would have cut in half the reported operating income to $88 million, or 49 cents a share.
Wall Street agrees with Apple that is hsould be a non-recurring event. However, "they won't be doing this again," says Lou Mazzucchelli, senior vice president and securities analyst for Gerard Klauer Mattison & Co. in New York. "How would you top it? Give him an island? A small country?"
We'll have to wait and see.