There has been a bit of a fuss about Uber's decision to change its method of accounting for revenues.
Basically, the rules would appear to offer a choice : 1) to disclose total journey income as revenues and deduct amounts paid to the drivers as costs Or
2) to net the two out and just declare the net commission received as revenues NB - the two options lead to identical net profits, it's not about flattering profits, it's about appearance. The accounting rules permit, or even encourage, a " substance over form " argument, where the reporting entity can consider what is actually being achieved by the transaction, not just its pure legal form. Uber would appear to have decided to report based more upon legal form, which is that Uber is a technology company running an app, than on substance, which is that Uber is a high-tech transportation company because it sets the prices, originates and interfaces with the customers, brands the service etc. One might think that an expanding start-up would want to report revenues as high as possible, to make investors think it was a larger company, but Uber is choosing not to do so. This appears to be a tactical decision. Reporting only commission income gives the impression that Uber is a technology company. Technology companies trade on higher net earnings multiples than transportation/utility companies, so all things being equal this should improve the share price. Uber's subtle distancing of itself from the actual carrying of passengers by suggesting that it just runs the app might also suggest to investors that Uber is similarly insulated from the potential costs, liabilities and regulatory risks that come from being an actual operator. As we know, Uber in reality is forced by regulators into assuming an operator position. Uber is under global attack for being a de facto employer but not acting like one. In addition, it is criticised for avoiding taxes. Reporting only commissions in its accounts would provide a defence against arguments like : " you account for total journey revenues and record payments to drivers as costs, that sounds like an employer/employee relationship " or " you have revenues of £xxxxx in the U.K. but you only pay £yyy in tax " or " you record gross revenues as " your " income, so you should be charging sales taxes ( e.g. VAT ) on them " So I assume that Uber has weighed up the practical pros and cons and decided that it prefers being shown as a commission earner, even at the cost of declaring lower gross revenues. Suggestions that this will somehow drive investors away because they can't see what's going on seem a bit far-fetched. The expert and specialised investors who might invest in Uber are quite capable of looking behind the reported information. Gross numbers might be included elsewhere in the accounts as notes or operating statements anyway. Nothing much to see here - little mileage in criticising an approach approved by both the SEC and one of the world's most prestigious accounting firms .... .... move along !