In the present paper we are to dwell on Facebook accounting policy. Firstly, it is logical, however, to say a few words about Facebook itself. So what is Facebook?
It is a social network whose history dates back to the year 2004. Initially being intended just for Harvard students, it caught on immediately with the larger public, becoming one of the most widely used social networks online. Its popularity can be proven by the quotes like: “In modern politics, even the leader of the free world needs help from the sultan of Facebookistan” and “Now friendships depend on and are subject to the Facebook's privacy policy” (Goodreads.com, 2016)
As a social networking service Facebook provides revenue to its owners coming predominantly from advertising. The revenue in question, it goes without saying, is rather high, and some controversies about Facebook accounting policies have been continually arising. Thus, it can be stated that currently Facebook prefers to hold to conservative principles of accounting so that not to exacerbate the situation. In other words, it can be stated that Facebook has quite limited flexibility and choices – any change from the conservative way of dealing the things with might lead to a new scandal.
Having said that, we have to mention, however, that it is sometimes within Facebook’s interest to deviate from its adopted standards so that to ensure the higher profits. Indeed, the service came under fire not once throughout its history for not playing by the rules. Furthermore, the fat money the service makes has always been a soft spot of Facebook.
Are there any documents that regulate and determine a Facebook’s approach to accounting? Indeed, there are. The main of such documents is Form 10-K. In the form various questions are addressed, ranging from risk factors and properties evaluation to more general information pertaining to the network.
Does Facebook rigidly adhere to the 10-K laid out principles? We have to say in this respect that it is hardly the case. The very fact that Facebook has continually been accused of its accounting policies can be a good proof. According to its critics, the company has neither clean audit report (just a formal one) nor does it really care for its customers and employees. Actually, it is sometimes claimed that its managers can manipulate the company’s revenue. Do such accusations have ground under them or is it again a classic example of vilification and slandering?
So how does Facebook make its profit? Through advertising, as it has been stated above. Besides, when a customer purchases something on Facebook, the service takes standard fees called processing fees. All the revenue is accounted for by the company in its annual audit report.
Yet accounting policies of Facebook have been changed under pressure from its opponents and the network had to be more discrete in its auditing. Moreover, the matters of taxation have also been on the forefront of attention. Facebook has had to cut its taxation slack and to become more transparent in its entirety as well as more conservative.
References
Goodreads.com,. (2016). Quotes About Facebook (199 quotes). Retrieved 2 February 2016, from http://www.goodreads.com/quotes/tag/facebook
