Could Amazon.com have hammered a nail into the entirely useful financial sub-culture of pro forma accounting?
Amazon executives pulled the rug out from under the doubting Thomases when they reported a US$5 million net profit for the fourth quarter according to generally accepted accounting principles (GAAP).
It could be the end of an era as quarter after quarter of dazzling pro forma numbers have now been derailed by a bona-fide three months in the black.
Meaning 'as if', pro forma accounting was originally intended to create a hypothetical set of accounts to marry the results of two companies undergoing merger.
It strips out those annoying little items which traditional accounting uncharitably includes, such as acquisition costs or taxes on stock option exercises.
During the boom of former United States president Bill Clinton's time it became one of the most useful tools in finance because it showed what an ideal world looked like and disproved those who insist that a sow's ear cannot be turned into a silk purse. In fact, pro forma numbers showed that a sow's ear could be turned into a silk purse with a buy recommendation from Merrill Lynch.
Everyone at the upper end of the food chain loves pro forma treatment of accounts because it allows them to tinker with the numbers until they prove that, while boring GAAP numbers are showing a company deep in the red, your online business-to-business hammock and avocado exchange is actually a General Electric in disguise.