Twitter recently made some changes in their IPO filing, which expanded the detailing of how they tally up sales for some of their advertising deals. The original version of the IPO was filed confidentially in July to the SEC and was not initially released to the public. It was implied that Twitter didn’t have a consistent policy in determining how much was stated in the financial filings.
Twitter IPO details
Twitter released their public IPO earlier this month and by that time, the revenue recognition policy had changed. This time, there was a much more detailed description on the revenue recognition policy. CNN Money’s Stephen Gandel explained, “Accounting experts say Twitter wouldn’t have changed the language unless it was flagged by the Securities and Exchange Commission, which polices public corporate filings. Twitter could not be reached for comment. Companies tend not to make public comments after they have filed for an IPO, but before they have completed the deal. Under the JOBS Act, Twitter was able to file the first versions of its S-1 confidentially. It later decided to release them. How and when companies count sales as revenue has been a growing concern for the SEC, and the accounting profession. The U.S.’s Financial Accounting Standards Board along with international regulators are in the process of setting revenue recognition rules.”
Twitter’s growth
The problem here is that Twitter has yet to make a profit, although their sales almost totaled a quarter of a billion during the first half of this year. The micro-blogging service is also growing at a fast pace. Since Twitter mostly earns their revenue from advertising, this means they get paid when users see advertised messages. The social media website earns additional money every time users click or re-tweet the ad.
In other Twitter news, the company will start trading on November 15th and will use TWTR as their ticker symbol.
