Tesla 2016 Annual Report Download - page 39

Furthermore,significantjudgmentisrequiredinevaluatingourtaxpositions.Intheordinarycourseofbusiness,therearemanytransactionsand
calculationsforwhichtheultimatetaxsettlementisuncertain.Asaresult,werecognizetheeffectofthisuncertaintyonourtaxattributesbasedonourestimatesof
theeventualoutcome.Theseeffectsarerecognizedwhen,despiteourbeliefthatourtaxreturnpositionsaresupportable,webelievethatitismorelikelythannot
thatthosepositionsmaynotbefullysustaineduponreviewbytaxauthorities.WearerequiredtofileincometaxreturnsintheUnitedStatesandvariousforeign
jurisdictions,whichrequiresustointerprettheapplicabletaxlawsandregulationsineffectinsuchjurisdictions.Suchreturnsaresubjecttoauditbythevarious
federal,stateandforeigntaxingauthorities,whomaydisagreewithrespecttoourtaxpositions.Webelievethatourconsiderationisadequateforallopenaudit
yearsbasedonourassessmentofmanyfactors,includingpastexperienceandinterpretationsoftaxlaw.Wereviewandupdateourestimatesinlightofchanging
factsandcircumstances,suchastheclosingofataxaudit,thelapseofastatuteoflimitationsorachangeinestimate.Totheextentthatthefinaltaxoutcomeof
thesemattersdiffersfromourexpectations,suchdifferencesmayimpactincometaxexpenseintheperiodinwhichsuchdeterminationismade.Theeventual
impactonourincometaxexpensedependsinpartifwestillhaveavaluationallowancerecordedagainstourdeferredtaxassetsintheperiodthatsuch
determinationismade.
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Results of Operations
Revenues
AutomotiverevenueincludesrevenuesrelatedtodeliveriesofnewModelSandModelXvehicles,includinginternetconnectivity,Superchargingaccess,
andovertheairsoftwareupdates,aswellassalesofregulatorycreditstootherautomotivemanufacturers,amortizationofrevenueforcarssoldwithresalevalue
guarantees,andvehicleleasingrevenue.
Servicesandotherrevenueconsistsofrepairandmaintenanceservices,serviceplansandmerchandise,salesofpre-ownedTeslavehicles,salesofelectric
vehiclepowertraincomponentsandsystemstoothermanufacturers,TeslaEnergyproducts,andnetsalesofnon-Teslavehicletrade-ins.
AutomotiverevenueduringtheyearsendedDecember31,2015,2014,and2013were$3.74billion,$3.00billion,and$1.92billion.Theincreasewas
primarilydrivenbytherampinvehicledeliveries.FortheyearsendedDecember31,2015,2014,and2013automotiverevenueincludes$309.4million,$132.6
millionand$33.5millionfromtheaccretionofthedeferredrevenuesfromourresalevalueguaranteeandothersimilarprograms,aswellasTeslaleasing.
ServiceandotherrevenueduringtheyearsendedDecember31,2015,2014,and2013were$305.0million,$191.3million,and$91.6million,related
primarilytoincreasesinpre-ownedvehiclesalesandmaintenanceservicerevenueinallyears,andincreasedpowertrainsalesin2014ascomparedto2013.
Cost of Revenues and Gross Profit
Costofautomotiverevenuesincludesdirectparts,materialandlaborcosts,manufacturingoverhead,includingamortizedtoolingcosts,shippingandlogistic
costs,vehicleinternetconnectivitycosts,allocationsofelectricityandinfrastructurecostsrelatedtoourSuperchargernetwork,andreservesforestimatedwarranty
expenses.Costofrevenuesalsoincludesadjustmentstowarrantyexpenseandchargestowritedownthecarryingvalueofourinventorywhenitexceedsits
estimatednetrealizablevalueandtoprovideforon-handinventorythatiseitherobsoleteorisinexcessofforecasteddemand.
CostofautomotiverevenuesfortheyearendedDecember31,2015,2014,and2013were$2.82billion,$2.15billion,and$1.48billion.Theincreaseincost
ofautomotiverevenueswasdrivenprimarilybyincreasedModelSdeliveries.FortheyearsendedDecember31,2015,2014,and2013,werecognized$172.4
million,$84.5,and$21.1millionincostofautomotiverevenuesrelatedtocarsaccountedforasoperatingleases.
Costofservicesandotherrevenueincludesdirectparts,materialandlaborcostsforrepairandmaintenanceservices,allocationsofservicecenteroverhead
costs,pre-ownedTeslavehiclesales,salesofourpowertraincomponents,andcostsrelatedtotheproductionandsaleofTeslaEnergyproducts.Fortheyears
endedDecember31,2015,2014,and2013costsofservicesandotherrevenuewere$299.2million,$170.9million,and$73.9million.Theincreaseincostof
servicesandotherrevenueswasdrivenprimarilybygreaterpre-ownedvehiclesalesandincreasedmaintenanceandrepairservicesinallyears,andincreased
powertrainsalestoDaimlerin2014ascomparedto2013.
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