US regulator questions Elon Musk-led Tesla's accounting changes: Report

The US Securities and Exchange Commission (SEC) sought clarifications on accounting changes made in Tesla’s second quarter earnings, according to a Business Insider report.

Aside from the accounting changes, an explanation was also sought on sales by acquired companies to third parties, an explanation on the company’s accounting of leased automobiles in 2019 and the reason why the company’s warranty reserve saw the removal of some costs.

Moneycontrol could not independently verify the report.

The report stated that Zachary Kirkhorn, Tesla’s head of finance, replied to the SEC that the changes in accounts was due to the increased costs that had come from up-scaling the manufacture of the Model 3.

Kirhorn also stated that the companies bought by Tesla had been contracted to sell goods to third parties. He also provided a justification that Tesla's accounting of warranty reserves was in line with regulations.

The report noted that SEC had closed its review on October 28. The SEC first made an inquiry into Tesla and SpaceX CEO Elon Musk's tweet on August 7, 2018, where he mulled over taking Tesla private at a price of $420 per share and that funding for the same had already been secured.

The problem here is that Musk has since provided no information on the source of that funding; $420 per share would raise Tesla's value to about $71 billion. This is what has caught the SEC's attention and made them question Musk on the authenticity of his statements and why he chose to reveal his plans on Twitter.