We are extremely transparent about the impact of such credits on our results and have chosen to separately present the automotive regulatory credits. In February, Tesla ultimately budged and saved face by sending a letter back to the SEC saying it will do it in the name of transparency: " You should emphasize that the sales of regulatory credits have no associated cost and the timing of such sales is not necessarily correlated to the actual sales of automobiles," it wrote to Tesla in a December letter. The SEC, however, noticed last April that an increase in income from regulatory credits - basically free money for Tesla - was making more money than its actual car leases and asked that they be reported separately as an intangible asset so as not to mislead investors. The rule says that entries could be folded into one line item if the revenue from one doesn't exceed 10% of the other, it said, and, since regulatory credits were 6% of its car sales revenue, it wasn't obliged to split the numbers in its financial statements. Tesla initially argued against that requirement, reveal the letters published by the SEC yesterday, presenting another SEC rule as an argument. The SEC, however, pressured the world's top electric carmaker to split the bulk number in different line items, as, according to its Regulation S-X, companies ought to be reporting income from tangible and intangible assets separately. That's more than a quarter of its profits and, understandably, Tesla has been reluctant to disclose the numbers separately, as it just recently began making more money from selling cars than from government-imposed carbon tax and various other regulations or subsidies. Tesla made US$1.5 billion from government subsidies and credit offsets bought by other automakers on US$5.2 billion in net income last year. Securities and Exchange Commission (SEC) just made its financial disclosure correspondence with Tesla public and solved the mystery of Tesla's sudden change of heart that lead to reporting regulatory credits as a separate entity in its annual statement.
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