Howard Schilit, a forensic accounting expert, has provided us with some valuable information. Uber and Lyft have some interesting notions about accounting. Both ride-share services offer discounts, coupons, incentives, freebies, and all manner of lures to get folks into an Uber or Lyft. Now, when you purchase a t-shirt from Vineyard Vines and they have e-mailed you a “Friends and Family 25% off” code, Vineyard Vines does not report a sale of $40 (the price of your t-shirt). It reports $30 in sales (because you did not pay the extra $10. Uber and Lyft, on the other hand, have a far different approach. If you have a 25% off coupon for a “ride share,” and you have a $40 fee from Chicago O’Hare to the Fairmont, you pay $30. Uber and Lyft, however, book the $40 as revenue/sales and take the $10 as a marketing expense.
The result is that Uber’s and Lyft’s sales are numbers are inflated materially, from 12-16%. Uber says its treatment is justified because its drivers are its customers. Those people riding in the cars of its customers (called drivers) are simply “end-users.” per Uber’s 10Q. Attention all folks seeking to hold Uber or Lyft liable for client injuries courtesy of Uber customer/driver. Uber has embraced those customers and perhaps should absorb liability.
Sales numbers should reflect the actual strength of growth or its decline. Marketing expenses are the out-of-pocket stuff, not the self-generated coupons posted on the Internet.Always read the fine print. Next time you are in a ride-share situation, ask the driver how Uber or Lyft is reading him as an employee.