Steve Jobs' Quandry: Airplane Tax Classification
The head of Apple Computers has a team of CPAs at KPMG working to resolve whether a bonus given to CEO Steve Jobs should be classified as a "recurring" or "non-recurring" event.
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.