Sample Group Project

FINANCIAL ANALYSIS OF
SOCIAL MEDIA INDUSTRY

MANAGEMENT ACCOUNTING
Submitted by:
ANSHUMAN NARANG (IPMX11008)
RACHIT MAHESHWARY (IPMX11022)
SAGAR SAMRAT DAS (IPMX11027)
SHEETANSHU PUJARI (IPMX11032)
TAMOGHNA GHOSH (IPMX11037)
Management Accounting Group Assignment
Contents
Table of Figures ...................................................................................................................................... 2
Introduction ............................................................................................................................................. 3
Motivation ............................................................................................................................................... 4
Choice of Industry............................................................................................................................... 4
Choice of Players ................................................................................................................................ 4
Macroeconomic Factors Affecting Social Media Industry ..................................................................... 5
Major Players in the Social Media Industry............................................................................................ 7
Business Model ....................................................................................................................................... 8
Cost Structure........................................................................................................................................ 10
Porter’s 5 Forces Model ........................................................................................................................ 11
Recently in News .................................................................................................................................. 11
Major Accounting Policies ................................................................................................................... 12
International Accounting Standard for Social Media Industries ........................................................... 14
Cost of Revenue .................................................................................................................................... 17
International Financial Reporting Standards (IFRS)............................................................................. 19
Financial Statements Analysis .............................................................................................................. 22
Balance Sheet .................................................................................................................................... 22
Income Statement.............................................................................................................................. 27
Cash Flow ......................................................................................................................................... 30
Financial Ratio Analysis ....................................................................................................................... 36
Liquidity Ratio .................................................................................................................................. 36
Solvency Ratio .................................................................................................................................. 37
Profitability Ratios ............................................................................................................................ 41
Market Analysis..................................................................................................................................... 46
References ............................................................................................................................................ 47
Social Media Industry

Table of Figures
Figure 1: Digital Around the world......................................................................................................... 3
Figure 2: Average minutes spent per visitor ........................................................................................... 5
Figure 4: Business Model of Social Media Industry............................................................................... 9
Figure 5: Porter's Five Forces impacting Social Media Industry .......................................................... 11
Figure 6: Facebook's revenue model..................................................................................................... 15
Figure 7: Revenue generation model of Facebook ............................................................................... 15
Figure 8: Twitter's revenue model ........................................................................................................ 16
Figure 9: Snapchat's revenue model ..................................................................................................... 17
Figure 10: Impairment loss under US GAAP and IFRS ....................................................................... 19
Figure 11: Business Combination in US GAAP & IFRS ..................................................................... 20
Figure 12: Current ratio for the three companies for last three years ................................................... 36
Figure 13: Acid Test/ Quick Ratio for the three companies for last three years ................................... 37
Figure 14: Debt Equity ratio for the three companies for last three years ............................................ 38
Figure 15: Asset Turnover Ratio for the three companies for last three years...................................... 39
Figure 16: Debt Turnover Ratio for the three companies for last three years ....................................... 40
Figure 17: Creditor Turnover Ratio for the three companies for last three years ................................. 41
Figure 18: Gross Margin for the three companies for last three years .................................................. 42
Figure 19: Net Profit Margin for the three companies for last three years ........................................... 43
Figure 20: Return on Asset for the three companies for last three years .............................................. 44
Figure 21: Return on Equity for the three companies for last three years ............................................ 45
Figure 22: Earning per Share for the three companies for last three years ........................................... 46

Introduction
Social media encompasses social networks, mobile platforms, information sharing, online
video, and far more. There are now thousands of professionals and companies that are deeply
involved in the social media sphere.
The number of social media users worldwide in 2018 is 3.196 billion, up 13 percent year-on-
year.
An estimated 750 million of these users in 2022 are expected to be from China alone and
approximately a third of a billion from India.
The region with the highest penetration rate of social networks is North America, where around
70 percent of the population has at least one social account. As of 2017, 81 percent of the
United States population had a social networking profile.
Figure 1: Digital Around the world

Motivation
Choice of Industry
Despite the ubiquity of social networks, market potential is still increasing, as not only user
figures but also user engagement continues to grow. On average, global internet users spend
some 135 minutes per day surfing social networks. This prompts worldwide brands and their
marketers to use that time and screen space to promote various products and services via social
media marketing or social advertising.
The global increase in social media usage since January 2017 is 13%. Saudi Arabia has the
largest year-on-year increase in social media users since January 2017 (32%), a 17% increase
compared to the global average.
Other countries with the largest social media usage increase includes India, Indonesia and
Ghana as technology is improving and social media becomes easily accessible to more of the
population. U.A.E, South Korea and the UK have the slowest increase with <5%.
The primary motivation of the report is to understand the accounting practices being followed
by the social media firms and how the firms do accounting of its cost, what are the assets of
the firm etc.
Choice of Players
Facebook connects more than 2.2 bn people with their friends and family around the world and
helps them discover new products and services from local and global businesses.
It is a catalyst for economic activity in ecosystems composed of marketers, app developers and
providers of connectivity.
Twitter another social networking site with 330 million active users.
The social media platform recently reported its first profitable quarter in the company’s 12-
year history. It made $91 million in the fourth quarter of 2017, but its user base stayed flat.
Snapchat is one of the fastest-growing social networks, with over 100 million daily active users
and 400 million snaps per day. For financial year 2017,Snap reported revenue of $824.9 million
USD, beating expectations of the analysts.

Figure 2: Average minutes spent per visitor
Macroeconomic Factors Affecting Social Media Industry
Political Factors
The Social Media business is directly related to the political situation. About Social Media
firms, government expresses its concern in the form that the data of the specific candidates
should be secured properly as their personal information.
These issues relating to the privacy of the information increase the cost of operations for Social
Media firms.
Moreover, social networking is also restricted by the government to generate illegal acts like
hacking of personal information and number of increasing fake accounts.
Therefore, the rules set by the government should be followed to have success, which means
that the political stability in developed countries would be a great opportunity for social Media
firms to expand its diversifying business in the social market.
The governmental support will allow the advertising service to display and seek opportunity
for its services.
Economic Factors
Economic condition and factors of the countries will shape the growth of social media firms.
Social media firms need to analyse the economic factors. The most important are Gross
Domestic Product (GDP) growth.
The motive for counting GDP growth in the study is that this is normally linked with purchase
expenditure and the buying power.
The market penetration with the increasing economic stability in developing countries must
provide a chance to social media firms. The rapid growth of the countries will lead to the
improvement of telecommunications and infrastructure.

Social Media firms can expand the global operations if the market penetrates because of the
economic stability.
Social Factors
The social conditions influence social media global reach. For Social media firms, it is crucial
to analyze the behaviors of people to accept the personal network.
There are privacy and correctly stated information issue. People should feel comfortable and
secure while uploading their personal information on the website. This will increase the active
users and ultimately will earn more profit.
People are improving their quality of life and emphasizing on the high-quality service that
presents a great opportunity for social media firms. The online buying strategy and behaviors
will create opportunities worldwide.
Technological Factors
Technology directly influences the founded business of social media firms. Social networking
sites like Facebook, Twitter, Snapchat should focus on the advanced technologies to entertain
the customers in more effective methods to provide them the extra platforms for their benefits.
Moreover, the basic security issue regarding the information hacking, latest technology should
be used by social media firms to make their customers more comfortable. For the improved
and enhanced user experience, social media firms must need to use the better mobile app.
Legal Factors
Law imposes a limitation on the social media business. Laws and regulations set by several
regulated bodies to operate the social networking sites are also very important. Social media
firms should focus on all the legislations that are required to operate smoothly and attract more
customers to be more popular in the internet industry. The legal right should be there for the
safe information handling. This will benefit more because the customers will accept
conveniently. The innovative new products and legal protection improve the patent laws by
providing an opportunity to social media firms. The company will be able to reach in many
areas and will benefit with the increasing coverage of Wi-Fi. Market reach and operational
functions will surely expand the functionality of social media firms.
Environmental Factors
Social media business links with natural environment. The ecological trends and issues affect
the macro environment of social media firms. Environment business analysis is vital for social
media firms to operate in the whole world professionally. The sustainability condition of social
media business will improve and satisfy the concerns of the natural environment. Better waste
policies and standards will address the complexity in Western countries and reduce the threats
of climate change social media firms have to face.

Major Players in the Social Media Industry

1. Facebook is an American social networking media that allows people to connect, make
friends and form groups based on common interests. It was first launched in February,
2004, for the students of Harvard as a student connect platform, and later extended for
other Ivy League schools and general public. The company went public in Feb, 2010.
The major source of revenue for Facebook is through advertisements, although the
clickthrough rate of Facebook is way lower compared to the world web services. As per
statistics available in January, 2018, Facebook had 2.2 billion active users.
Facebook acquired the “fb.com” domain name from American Farm Bureau Federation in
November, 2010. In April, 2012, it acquired Instagram for approximately US $1 Billion in
cash and stock. It also bought the multimedia messaging app WhatsApp in February, 2014
for US $19 Billion in cash and stocks. Its latest acquisition includes CrowdTangle, a social
analytics company.
Launched February 2004, Cambridge, Massachusetts, United States

Headquarters Menlo Park, California, United States
Founders Mark Zuckerberg, Eduardo Saverin, Chris Hughes, Dustin Moskovitz, Andrew
McCollum
CEO Mark Zuckerberg
CFO David Wehner
Subsidiaries WhatsApp Inc., Oculus VR, Onavo, Sharegrove Inc., MORE
Website www.facebook.com
Revenue US$40.653 billion (2017)
Net income US$15.934 billion (2017)
Alexa rank 3 (January 2018)
Users 2.2 billion monthly active users (January 2018)
2. Second in the list is Twitter. Twitter is a news and social networking platform where
people can express their opinions or views or mood through a text string of length between
140 and 280 characters. The platform was created in March, 2011 and was launched in
July, 2011. In 2013, Twitter became the most visited website of the year. As of October,
2017, it had 330 million active users.
Twitter has grown over the years through various mergers and acquisitions. The majority
of the companies the acquired were mobile application development, marketing and
advertising solutions and data analytics companies, for example Atebits, Crashlyctics,
Trendrr, MoPub, Niche, etc.
Launched July 15, 2006; 11 years ago

Headquarters San Francisco, California, United States

Founder(s) Jack Dorsey, Noah Glass, Biz Stone, Evan Williams
CEO Jack P. Dorsey
CFO Ned Segal
Subsidiaries Vine, Periscope, MoPub
Website www.twitter.com
Revenue US$ 2.44 billion (2017)
Net income US$ -108.06 million (2017)
Employees 3,372 (2017)
Alexa rank 12 U.S. (Global, June 2018)
Users 330 million active users (October 2017)
3. Snapchat is a multimedia messaging application, through which users can share picture or
video messages.
These pictures and videos are available on the platform for a short-time after which they are
inaccessible. Over the time Snapchat has evolved from person to person photo sharing
medium to featuring a”stories” of 24-hrs chronological content.
It was first launched a Picaboo for iOS on 8th of July, 2011 and was later relaunched as
Snapchat in September, 2011. It is primarily used for creating multimedia messages. As of
February, 2018, Snapchat had 187 million daily active users.
In July, 2016, Snapchat acquired Bitstrips and its application Bitmoji, which allowed users
to design stickers featuring personalized cartoon avatars. In August, 2016, it launched
geostickers which allowed users to send city specific steakers.
Launched September 2011; 6 years ago

Headquarters Los Angeles, California, United States
Founder(s) Evan Spiegel, Bobby Murphy, Reggie Brown
Developer(s) Snap Inc.
CEO Evan Spiegel
Employees 3,000 (March 2018)
Website www.snapchat.com
Users 187 million daily active users (February 2018)
Business Model
The below is the illustrative business model of a typical internet (social media) company:

Figure 3: Business Model of Social Media Industry
Below is a brief of the various branches of a Social Media Company
Key Partners
These are the people/organisations that help a social media company in raising funds to run
smooth operations, develop content for the platform and generate revenue through advertising.
Channels
There are multiple channels through which the social media companies can reach out to the
people. It can either be through desktops or mobiles. A company needs to identify the most
effective way of utilizing these channels to give the best experience to its subscribers.
Key Activities
The major activities of a social media company involve platform development and IT
infrastructure development. With so many competitors, it very important for these companies
to evolve and come up with innovative ideas to attract more subscribers and maintain the
existing database. The same can be achieved by constantly coming up with innovative updates
to their platforms.

Value Proposition
With the stringent competition in the social media industry and entry of more innovative
competitors, it becomes important to offer unique value to the customers. It is important to
offer services that differentiate you from other players, or you risk losing your customers.
Revenue Streams
The major sources of revenue for these companies is advertisements. a part of their revenue
also comes from bulk access to social media data sold to third parties.
Cost Structure
Major Costs in Social Media industry include:
R&D and Product Development

Social Media, being a free platform, it is important for the competitors to constantly come up
with innovative ways to attract more and more subscribers. This requires large investment in
Research and Development to improve the visual appeal and the ease of usability of these
websites and mobile applications.
With the advent of Data Analytics and Artificial intelligence, these companies are further
investing in these technologies to combat abusive and problematic content on their platform
and improve targeted marketing.
Employee benefits expense
Employee salaries and benefits form a major chunk of the cost in this industry. Not only
compensation, other benefits such as office building, food, shuttle, etc are included in this cost.
IT infrastructure Development and Maintenance

Social media sites require servers for storing the huge amount of data and multimedia uploaded
by the subscribers. Companies have to pay for the operation and maintenance of these servers,
which occupies a large portion of their costs.

Porter’s 5 Forces Model
Figure 4: Porter's Five Forces impacting Social Media Industry
Recently in News
The Facebook–Cambridge Analytica data scandal involved the collection of personally
identifiable information of up to 87 million Facebook users. On April 25, 2018, Facebook
released their first earnings report since the scandal was reported. Revenue fell since the last
quarter, but this is usual as it followed the holiday season quote. The quarter revenue was the
highest for a first quarter, and the second overall.
Mergers & Acquisitions: Facebook acquired AI firm "Ozlo" in July 2017, Social Media app
"tbh" in Oct 2017 and is currently in process of acquiring Bloomsbury AI. Twitter acquired a
Spam & Fraud Prevention Service "Smyte" in Jun 2018. Snap has spent $352.4 million in
cash on acquisitions this financial year.
Twitter joined the S&P 500 index in Jun 2018. Twitter’s 58 percent gain in 2018 would be
the fifth-largest in the S&P 500. Analysts are not sanguine about the stock’s prospects. Their
average forecast implies a 19 percent decline over the next 12 months, data compiled by
Bloomberg showed. Twitter also turned profitable for first time in Q4 2017 since its inception
in March 2006.
Snapchat to launch new gaming platform whereas Twitter has doubled its character limit
this year.

Major Accounting Policies

Accounting
Policies Facebook Twitter Snapchat
Advertising revenue is generated by Revenue is generated from the Snapchat's revenue is
displaying ad products on Facebook, sale of advertising services and generated through various
Instagram, Messenger, and third-party rest through data licensing and advertising products. Sales
affiliated websites or mobile other arrangements. Data tax is excluded from reported
applications. Revenue recognized from licensing revenue is generated revenue. Snap-sold revenue is
the display of impression-based ads in based on monthly service fees. recognized based on the gross
the contracted period in which the Other revenue is primarily amount charged to the
impressions are delivered. Revenue generated from service fees from advertiser. Partner-sold
recognized from the delivery of action- transactions completed on mobile revenue is recognized based
Revenue based ads in the period in which a user ad exchange. Revenue related to on the net amount of revenue
Recognition takes the action the marketer contracted ad exchange services is reported received from the content
for. For advertising revenue on a net basis. Promoted Tweets partners. Snap-sold revenue is
arrangements, revenue is recognized on and Promoted Accounts are reported on a gross basis.
a net basis. Payments revenue is priced through an auction, and Revenue related to
comprised of the net fee received from Promoted Trends are priced on a transactions is reported on a
developers using Payments fixed-fee-per day per geography net basis.
infrastructure. Other fees revenue basis.
consists primarily of revenue from the
delivery of virtual reality platform
devices, and various other sources.
Cost of revenue consists primarily of Cost of revenue includes Cost of revenue includes
expenses associated with the delivery infrastructure costs, other direct payments made on revenue
and distribution of products. Cost of costs including content costs, share arrangements. Cost of
revenue also includes costs associated amortization of acquired revenue also consists of
with partner arrangements, including intangible assets and capitalized expenses associated with
content acquisition costs, credit card labor costs, allocated facilities hosting costs of the Snapchat
and other transaction fees related to costs, as well as traffic mobile application and
processing customer transactions, cost acquisition costs, or TAC. Many content creation, which
of virtual reality platform device of the elements of cost of revenue includes personnel-related
Cost of Revenue
inventory sold, and amortization of are fixed, and cannot be reduced costs and advertising
intangible assets. in the near term to offset any measurement services. In
decline in revenue. addition, cost of revenue
includes inventory costs for
hardware product and
facilities and other supporting
overhead costs, including
depreciation and
amortization.
Accounts receivable are recorded and Accounts receivable are recorded The Company records
carried at the original invoiced amount at the invoiced amount less any accounts receivable at the
less an allowance for any potential allowance for doubtful accounts invoiced amount. The
uncollectible amounts. Estimates are to reserve for potentially Company maintains an
made for the allowance for doubtful uncollectible receivables. To allowance for doubtful
accounts and allowance for unbilled determine the amount of the accounts to reserve for
receivables based upon assessment of allowance, judgments are made potentially uncollectible
Account
various factors, including historical about the creditworthiness of receivable amounts. In
Receivables
experience, the age of the accounts customers based on ongoing evaluating the Company’s
receivable balances, credit quality of our credit evaluation and historical ability to collect outstanding
customers, current economic conditions, experience. At December 31, receivable balances, the
and other factors that may affect the 2015 and 2016, the allowance for Company considers various
ability to collect from customers. doubtful accounts was factors including the age of
immaterial. the balance, the
creditworthiness of the

customer, which is assessed

based on ongoing credit
evaluations and payment
history, and the customer’s
current financial condition.
Goodwill is reviewed for impairment at Goodwill is tested for impairment The Company’s impairment
least annually or more frequently if at least annually, in the fourth tests are based on a single
events or changes in circumstances quarter, or whenever events or operating segment and
would more likely than not reduce the changes in circumstances indicate reporting unit structure. If the
fair value of our single reporting unit that goodwill might be impaired. carrying value of the
below its carrying value. As At December 31, 2015 and 2016, reporting unit exceeds its fair
of December 31, 2017, no impairment there was a single operating value, the second step of the
of goodwill has been identified. segment and reporting unit test is performed by
structure. comparing the carrying value
of the goodwill in the
Goodwill reporting unit to its implied
fair value. An impairment
charge is recognized for the
excess of the carrying value
of goodwill over its implied
fair value.The Company
conducted its annual goodwill
impairment test during the
fourth quarter of 2016 and
determined that goodwill was
not impaired.
Facebook is subject to taxation in the The Company is subject to Snapchat are subject to
United States and various other state taxation in the United Stadtes and income taxes in the United
and foreign jurisdictions. Facebook is various state and foreign States and numerous foreign
subjected to potential examination in jurisdictions. Earnings from non- jurisdictions. These foreign
material jurisdictions of the United US activities are subject to local jurisdictions have different
States and Ireland. The effective tax rate country income tax. The material statutory tax rates than the
is lower than the United States statutory jurisdictions in which the United States. Additionally,
rate primarily because of income in Company is subject to potential certain of the foreign earnings
jurisdictions with tax rates lower than examination by taxing authorities may also be taxable in the
that of the United States. Facebook has include the United States, United States. The effective
not provided United States taxes for all California and Ireland. The tax rate differs from the U.S.
foreign earnings because a substantial Company computes its quarterly statutory tax rate primarily
Income Tax portion of those earnings will be income tax provision by using a due to valuation allowances
reinvested outside of the United States. forecasted annual effective tax on deferred tax assets as it is
rate and adjusts for any discrete more likely than not that
items arising during the quarter. some or all of the deferred tax
The effective tax rates have assets will not be realized.
differed from the statutory rate
primarily due to the tax impact of
foreign operations, state taxes,
certain benefits realized in
recording the tax effects of
business combinations, and the
recording of U.S. valuation
allowance

International Accounting Standard for Social Media Industries:

The accompanying financial statements are prepared in accordance with U.S. generally
accepted accounting principles (GAAP). The Company operates only one legal entity.
Foreign Currency Transactions

The functional currency is U.S. dollar. Foreign currency transactions are translated into U.S.
dollar using the exchange rates prevailing at the dates of the transactions. Additionally, foreign
currency denominated transactions are initially recorded and re-measured at the end of each
period using the applicable exchange rate in effect.
Fair Value
The carrying value of the Company’s financial instruments, including cash, accounts
receivable, restricted cash, and accounts payable, approximates fair values due to their short
maturities.
Cash and Accounts Receivable

Cash consist principally of cash accounts and money market accounts. Accounts receivable
represent transactions processed by the payment processors for which remittance is due to the
Company. Allowances for doubtful accounts are recorded where collectability is uncertain. The
Company evaluates the adequacy of these allowances by considering a number of applicable
factors, including payment processor’s financial condition, historical collection experience,
receivable aging, and current economic conditions.
Revenue Recognition and Revenue Sources

The Company recognizes revenue when all of the following conditions are met:
• There is persuasive evidence of an arrangement

• The service has been provided to the customer
• The collection of the fees is reasonably assured
• The amount of fees to be paid by the customer is fixed or determinable
Deferred revenue
It consists of subscription fee revenue received in advance of revenue recognition. Revenue
that the Company expects to recognize during the 12 months following the balance sheet date
are presented in deferred revenue, current portion in the balance sheets.
If you buy and hold Facebook credits (used to buy virtual goods in games on Facebook)
Facebook treats the purchase as deferred revenue--the same way a retailer would book the sale
of a gift card--until you spend your credits. When you buy Farmville’s hot rod tractor, you use
your Facebook credits or charge $10 (which, unseen to you, buys 100 Facebook credits that

are converted to 55 in Farm Cash). Facebook sends $7 to Zynga and keeps 30%--$3--as a
processing fee, moving that $3 from deferred revenue into current revenue.
FASB doesn’t have social media standards, but its broader guidelines hold that revenue should
not be recognized until it is both realized (or realizable) and earned.
The three major players pertaining to our discussion – Facebook, Twitter and Snapchat use
advertising as their primary source of revenue. However, there is a difference in the process in
which these 3 players generate revenue.
Facebook
advertieser
3rd party facebook

sites facebook users
application
Developer
Figure 5: Facebook's revenue model
Besides Advertising, Facebook offers a set of development tools and application programming
interfaces (APIs) to the developers to help them create web and mobile apps for the Facebook
platform. When users purchase virtual and digital goods from the developer apps, Facebook
receives a fee from the developers for the use of its payment infrastructure.
Figure 6: Revenue generation model of Facebook

Twitter
Figure 7: Twitter's revenue model
Besides promoting through advertisements, Twitter sells its public data that it calls Firehose
and that amounts to around 500 million tweets each day to various companies. Companies can
utilize this data to analyse consumer trends and generate insights about brands and companies.
Since the tweets are public, consumers can also access this data. Because of the volume of the
data, companies can learn about their users in a detailed manner, something that a normal user
would not be able to. Of course, the data analysis tools have to be sophisticated enough.
Snapchat
It’s the same case with Snapchat Business Model whose main revenue source
is Advertising. However, unlike Twitter Business Model, the company doesn’t sell any of its
users’ information. At Snapchat, the team that designs the consumer products also creates the
advertising products. This results in advertisements which are so user-friendly and
camouflaged, that many users don’t even know that they are advertisements and rather enjoy
them.

GeoFilters
SNAPCHAT
Stories,Shazam
Lenses
(Engaging and Discover
advertisement)
Snap Store
Figure 8: Snapchat's revenue model
Cost of Revenue
The major component of cost of revenue for the social media industry comes from the
following three main items:
Research and development

These consist primarily of share-based compensation, salaries, and benefits for employees in
the organization engineering and technical teams responsible for building new products as
well as improving existing products.
The Companies costs to develop software for internal use incurred during the application
development stage. Costs related to preliminary project activities and post implementation
activities are expensed as incurred. There are no material qualifying costs incurred during the
application development stage in any of the periods presented.

Marketing and sales

These consist primarily of salaries, benefits, and share-based compensation for employees in
sales, sales support, marketing, business development, and customer service functions. These
also include marketing and promotional expenditures as well as amortization of intangible
assets.
General and administrative

These consist of salaries, benefits, and share-based compensation of executives and employees in
legal, finance, human resources, corporate communications and policy, and other administrative
functions. In addition, these include outside consulting fees and legal and accounting services fees.
These also include expenses related to legal settlements and amortization of intangible assets.
Share-Based Compensation
The Companies accounts for share-based employee compensation plans under the fair value
recognition and measurement provisions of GAAP. Those provisions require all share-based
payments to employees, including grants of stock options, to be measured based on the grant-
date fair value of the awards, with the resulting expense generally recognized in its statements
of operations over the period during which the employee is required to perform service in
exchange for the award.
The Company recognizes compensation expense for stock option grants on a straight-line basis
over the period during which an employee is required to provide services in exchange for the
option award (requisite service period). Share-based compensation expense recognized at fair
value includes the impact of estimated forfeitures. The Company estimates future forfeitures
at the date of grant and revises the estimates, if necessary, in subsequent periods if actual
forfeitures differ from those estimates.
Income Taxes
The Companies recognizes income taxes under the asset and liability method. The Company
recognizes deferred income tax assets and liabilities for the expected future consequences of
temporary differences between the financial reporting and tax bases of assets and liabilities.
These differences are measured using the enacted statutory tax rates that are expected to apply
to taxable income for the years in which differences are expected to reverse. The Company
recognizes the effect on deferred income taxes of a change in tax rates in income in the period
that includes the enactment date.
Intangible Asset/Goodwill
Under generally accepted accounting principles in the United States, or U.S. GAAP, the
companies review their intangible assets for impairment when events or changes in
circumstances indicate the carrying value may not be recoverable. Goodwill is required to be
tested for impairment at least annually.

International Financial Reporting Standards (IFRS)
The accounting standard used in more than 110 countries – has some key differences from the
United States' Generally Accepted Accounting Principles (GAAP). At the conceptual level,
IFRS is considered more of a principles-based accounting standard in contrast to GAAP, which
is considered more rules-based. By being more principles-based, IFRS, arguably, represents
and captures the economics of a transaction better than GAAP. Some of differences between
the two accounting frameworks are highlighted below.
1. Permissible inventory cost flow method in US GAAP and IFRS
IFRS doesn’t permit LIFO, whereas US’ GAAP allows LIFO. However, inventory is not a
matter of discussion for the type of industries in under discussion.
2. Calculation of impairment loss under US GAAP and IFRS
Impairment of Goodwill
IFRS US GAAP
Single step approach Two step Approach
Carrying value > Future value Carrying Value > Recoverable

of cash generating unit reporting Unit
Loss= Carrying value of

Goodwil - implied future
value of Goodwill
Figure 9: Impairment loss under US GAAP and IFRS

Both IFRS and US GAPP requires an annual basis of impairment check to be done on intangible
assets such as goodwill.
3. Categorisation of Business Combination in US GAAP & IFRS
Figure 10: Business Combination in US GAAP & IFRS

4. Treatment of Lease – Lessee’s perspective
US GAAP
Operating Lease
Any 1 from the below:

1. Transfer of ownsership
Lesse's
prospective 2. Baragin purchase
3. Lease term > 0.75 of Financial
asset's useful life Lease
4.Present value of lease
payments is more than 90%
of fair value of leased asset
IFRS
Has the ownership of Risk and Reward transferred from the lessor to lessee?
If Yes, Categorise it as Financial Lease.
Otherwise, treat it as Operating Lease.
From a Lessor perspective, under US GAAP, if any one of the aforementioned criteria satisfies
along with the following two criteria, GAPP treats it as financial/capital lease.
1. Collectability of the lease payment is predictable.
2. There are no significant uncertainties regarding the amount of costs still to be incurred
by the lessor under the provisions of the lease agreement.
The IFRS however keeps it really simple and just reinforces the same criteria that’s applicable
for Lessee. Lessor must classify the lease as a finance lease if all the risks and rewards of
ownership are transferred to the lessee.

Financial Statements Analysis

Following is the analysis of Balance Sheet, Profit and Loss Statement, Cash Flow Statement
for Facebook, Twitter and Snapchat. All the further analysis in this report is based on the
standalone financials of all these companies.
Balance Sheet
Twitter
TWITTER, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except par value)
Year Ended December 31,

2017 2016 2015 2014 2013
Assets
Current assets:
Cash and cash equivalents $16,38,413 $9,88,598 $9,11,471 $15,10,724 $8,41,010
Short-term investments 27,64,689 27,85,981 25,83,877 21,11,154 13,93,044
Accounts receivable, net of allowance for doubtful accounts of $5,430, $7,216, $8,121, $5,507, $2,020
as of December 31, 2017,December 31, 2016,December 31,2015,December 31,2014,December 31,2013 respectively 6,64,268 6,50,650 6,38,694 4,18,454 2,47,328
Prepaid expenses and other current assets 2,54,514 2,26,967 2,47,750 2,15,521 93,297
Total current assets 53,21,884 46,52,196 43,81,792 42,55,853 25,74,679
Property and equipment, net 7,73,715 7,83,901 7,35,299 5,57,019 3,32,662
Intangible assets, net 49,654 95,334 1,41,015 1,05,011 77,627
Goodwill 11,88,935 11,85,315 11,22,728 6,22,570 3,63,477
Other assets 78,289 1,53,619 61,605 42,629 17,795
Total assets $74,12,477 $68,70,365 $64,42,439 $55,83,082 $33,66,240
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $1,70,969 $1,22,236 $1,34,081 $53,241 $27,994
Accrued and other current liabilities 3,27,333 3,80,937 2,83,792 2,28,233 1,10,310
Capital leases, short-term 84,976 80,848 88,166 1,12,320 87,126
Total current liabilities 5,83,278 5,84,021 5,06,039 3,93,794 2,25,430
Convertible notes 16,27,460 15,38,967 14,55,095 13,76,020
Capital leases, long-term 81,308 66,837 59,695 1,18,950 1,10,520
Deferred and other long-term tax liabilities, net 13,240 7,556 2,978 24,706 59,500
Other long-term liabilities 59,973 68,049 50,585 43,209 20,784
Total liabilities $23,65,259 $22,65,430 $20,94,392 $19,56,679 4,16,234
Commitments and contingencies (Note 14)
Stockholders' equity:
Preferred stock, $0.000005 par value-- 200,000 shares authorized; none issued — —
and outstanding
Common stock, $0.000005 par value-- 5,000,000 shares authorized; 746902,
721572,694132,642385,569922shares issued and outstanding as of December 31, 2017,
December 31, 2016, December 31,2015, December 31,2014,December 31,2013 respectively 4 4 3 3 3
Additional paid-in capital 77,50,522 72,24,534 65,07,087 52,08,870 39,44,952
Accumulated other comprehensive loss -31,579 -69,253 -45,566 -10,024 -323
Accumulated deficit -26,71,729 -25,50,350 -20,93,477 -15,72,446 -9,94,626
Total stockholders' equity 50,47,218 46,04,935 43,68,047 36,26,403 29,50,006
Total liabilities and stockholders' equity $74,12,477 $68,70,365 $64,42,439 $55,83,082 $33,66,240
• The cash and cash equivalents declined by around 40% in year 2015 as compared to year
2014. However, it increased consistently in the rest of the years. In 2017, the cash and cash
equivalents increased by over 65% in year 2017 as compared to year 2016. The primary
reason for the healthy cash balance is the company’s focus to preserve capital and meet
liquidity requirements.

• As the company invests its excess cash primarily in short-term fixed income securities,
including government and investment-grade debt securities and money market funds, the
short-term investments represent the largest portion of the company’s total assets.
• The company has managed to keep accounts receivable below 10% for the last five years.
This shows that the company’s ability to collect outstanding balances is very good. Also,
the company’s accounts receivables are pretty unsecured and are derived from customers
around the world in different industries.
• The other long-term liabilities decreased significantly by around $11 million in the year
2017 as compared to year 2016.
• The accounts payable are also very low, accounting for between 0-3% of the company’s
total liabilities over the last 5 years.
• The stockholder’s equity has increased consistently over the last five years by over $41
million from 2013 to 2017.

Facebook
FACEBOOK, INC.
(In millions, except for number of shares and par value)
Year ended December 31,

2017 2016 2015 2014 2013
Assets
Current assets:
Cash and cash equivalents $ 8,079 $ 8,903 $ 4,907 $ 4,315 $ 3,323
Marketable securities 33,632 20,546 13,527 6,884 8,126
Accounts receivable, net of allowances for doubtful accounts of $189, 5,832 3,993 2,559 1,678 1,109
$94,$68,$39,$38 as of December 31, 2017, December 31,2016,December
31,2015,December 31,2014 and December 31,2013 respectively
Income tax refundable 0 51

Prepaid expenses and other current assets 1,020 959 659 513 461
Total current assets 48,563 34,401 21,652 13,390 13,070
Property and equipment, net 13,721 8,591 5,687 3,967 2,882
Goodwill 1,884 2,535 3,246 3,929 1,722
Intangible assets,net 18,221 18,122 18,026 17,981
Other assets 2,135 1,312 796 699 221
Total assets $ 84,524 $ 64,961 $ 49,407 $ 39,966 $ 17,895

Accounts payable $ 380 $ 302 $ 196 $ 176 $ 87
Platform partners payable 390 280 217 202 181
Accrued expenses and other current liabilities 2,892 2,203 1,449 866 555
Deferred revenue and deposits 98 90 56 66 38
Current portion of capital lease obligations 0 - 7 114 239
Total current liabilities 3,760 2,875 1,925 1,424 1,100
Capital lease obligations, less current portion 0 - 107 237
Long-term debt 0 0 119 -
Other liabilities 6,417 2,892 3,157 2,327 1,088
Total liabilities $ 10,177 $ 5,767 $ 5,189 $ 3,870 $ 2,425
Commitments and contingencies
Common stock, $0.000006 par value; 5,000 million Class A shares
authorized ,2397 million, 2354 million, 2293 million, 2234 million and 1970
million shares issued and outstanding as of December 31, 2017,December
31,2016,December 31,2015,December 31,2014,December 31,2013
respectively, 1,671 million and 117 million shares issued and outstanding,
including 8 million,13 million and 6 million outstanding shares subject to
repurchase as of December 31,2015,December 31,2014,December
31,2013 respectively;4141 million Class B shares authorized,509
million,538 million, 552 million, 563 million and 577 million shares issued and
outstanding, including 3 million,6 million and 11 million outstanding shares
subject to repurchase as of December 31,2015,December
31,2014,December 31,2013 respectively.
Additional paid-in capital 40,584 38,227 34,886 30,225 12,297

Accumulated other comprehensive income (loss) -227 -703 -455 -228 14
Retained earnings 33,990 21,670 9,787 6,099 3,159
Total stockholders' equity 74,347 59,194 44,218 36,096 15,470
Total liabilities and stockholders' equity $ 84,524 $ 64,961 $ 49,407 $ 39,966 $ 17,895
• Deferred revenue has decreased from 0.22% of total assets in 2012 to 0.11% of total assets
in 2017.

• Consistently, Facebook has maintained a healthy cash balance (as a percentage of total
assets) over the last five years.
• From 2015, Facebook has paid off its long term debt entirely and it didn’t incur any long
term debt after 2015. This indicates the good financial health of the company
• The amount of goodwill has decreased significantly from 9.6 % of total assets in 2013 to
2.22% of total assets in 2017.
• The total assets have increased consistently over the last five years. This can be explained
by the many acquisitions Facebook has done, the most notable ones being of Instagram in
2012 and WhatsApp in 2014.
• As a result of the good performance by the company and the acquisitions done by the
company, the investments by stockholders has increased into the company. The
investments by stockholders has increased by around 25.60% from FY 2016 to FY 2017.
This shows the confidence of stockholders in the company.
Snap Inc
SNAP INC.

2017 2016 2015
Assets
Current assets:
Cash and cash equivalents $3,34,063 $1,50,821 $6,40,810
Marketable securities 17,08,976 8,37,247 0
Net Accounts Receivable 2,79,473 1,62,659 44,325
Prepaid expenses and other current assets 44,282 29,958 7,429
Total current assets 23,66,794 11,79,985 6,92,564
Property and equipment,net 1,66,762 1,00,585 44,079
Intangible assets, net 1,66,473 75,982 43,230
Goodwill 6,39,882 3,19,137 1,33,944
Other assets 81,655 47,103 25,119
Total assets $34,21,566 $17,22,792 $9,38,936
Accounts payable, accrued expenses and other current liabilities $3,46,256 $1,56,744 $1,56,258
Capital leases, short-term 0 0 0
Total current liabilities 3,46,256 1,56,744 1,56,258
Convertible notes 0 0 0
Capital leases, long-term 0 0 0
Deferred and other long-term tax liabilities, net 0 0 0
Other liabilities 82,983 47,134 18,533
Total liabilities $4,29,239 $2,03,878 $1,74,791
Common stock $12 $5 $5
Additional paid-in capital 76,34,825 27,28,823 14,67,355
Accumulated other comprehensive loss 14,157 -2,057 -10,000
Accumulated deficit -46,56,667 -12,07,862 -6,93,219
Total stockholders' equity 29,22,327 15,18,914 7,64,145
Total liabilities and stockholders' equity $34,21,566 $17,22,792 $9,38,936
• During the last three years, the amount of goodwill generated by the company has
increased with each passing year. This can be attributed to the acquisitions completed by
the company in the past three years.
• The property and equipment increased by a smaller percentage in 2017 as compared to
2016 when compared to other asset classes. This is due to several reasons. Firstly, the
company didn’t purchase any land during this period. Also, the total construction in

progress declined from $20.79 million to $9.841 million. The depreciation expense also
increased from $17.8 million to $37.7 million.
• The other liabilities increased significantly by around 154% from 2015 to 2016 and by
around 76% from 2016 to 2017. The other liabilities consisted of lease incentive liability,
deferred rent, build-to-suit financing obligations, acquisition purchase consideration
liability and other.
• As of December 2017, there was no long-term debt outstanding even though in July 2016,
the company entered into a five year senior unsecured revolving credit facility (“Credit
Facility”) with lenders which allowed them to borrow up to $1.1 billion to fund working
capital and general purpose corporate expenditures. In December 2016, this amount was
increased to $1.2 billion and in February 2018 to $1.25 billion.

Income Statement
Twitter
TWITTER, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
2017 2016 2015 2014 2013
Revenue
Advertising services $21,09,987 $22,48,052 $19,94,036 $12,55,688 $594,546
Data licensing and other 3,33,312 2,81,567 2,23,996 1,47,314 70,344
Total Revenue 24,43,299 25,29,619 22,18,032 $14,03,002 $6,64,890
Costs and expenses
Cost of revenue 8,61,242 9,32,240 7,29,256 4,46,309 2,66,718
Research and development 5,42,010 7,13,482 8,06,648 6,91,543 5,93,992
Sales and marketing 7,17,419 9,57,829 8,71,491 6,14,110 3,16,216
General and administrative 2,83,888 2,93,276 2,60,673 1,89,906 1,23,795
Total costs and expenses 24,04,559 28,96,827 26,68,068 19,41,868 13,00,721
Income (loss) from operations 38,740 -3,67,208 -4,50,036 -5,38,866 -6,35,831
Interest expense -1,05,237 -99,968 -98,178 -35,918 -7,576
Other income (expense), net -28,921 26,342 14,909 -3,567 -3,739
Loss before income taxes -95,418 -4,40,834 -5,33,305 -5,78,351 -6,47,146
Provision (benefit) for income taxes 12,645 16,039 -12,274 -531 -1,823
Net loss -$1,08,063 -$4,56,873 -$5,21,031 -$5,77,820 -$6,45,323
Net loss per share attributable to common stockholders:
Basic -$0.15 -$0.65 -$0.79 -$0.96 -$3.41
Diluted -$0.15 -$0.65 -$0.79 -$0.96 -$3.41
Weighted-average shares used to compute net loss
per share attributable to common stockholders:
Basic 7,32,702 7,02,135 6,62,424 6,04,990 1,89,510
Diluted 7,32,702 7,02,135 6,62,424 6,04,990 1,89,510
Adjusted EBITDA $8,62,986 $7,51,493 $5,57,807 $3,00,896 $75,430
Non-GAAP net income (loss) $3,28,859 $2,64,406 $1,80,486 $68,438 -$19,057
Stock-based compensation expense included in
costs and expenses:
Cost of revenue $23,849 $29,502 $40,705 $50,536 $50,942
Research and development 2,40,833 3,35,498 4,01,537 3,60,726 3,79,913
Sales and marketing 94,135 1,60,935 1,56,904 1,57,263 1,14,440
General and administrative 74,989 89,298 82,972 63,072 55,072
Total stock-based compensation expense $4,33,806 $6,15,233 $6,82,118 $6,31,597 $6,00,367
• Although the total revenue has increased significantly from 2013 to 2017, however,
there has been a decrease of 3% in total revenue from 2016 to 2017.
• The advertising revenue which constitutes nearly 85-90% of the total revenue decreased
by around 6% in 2017 as compared to 2016. The decrease in advertising revenue was
primarily attributable to a 52% decrease in average cost per ad engagement offset by a
96% increase in the number of ad engagements in 2017 compared to 2016.
• The net loss has decreased consistently over the last five years with a decrease of 76%
from 2016.
• The cost of expenses after increasing consistently from 2013 to 2016 has decreased by
approx $492 million in 2017 as compared to 2016. This decrease is mainly due to the

decrease in personnel-related costs, decrease in facilities and other overhead expenses,

and a decrease in depreciation and amortization expense.
Facebook
FACEBOOK, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per share amounts)

2017 2016 2015 2014 2013
Revenue $ 40,653 $ 27,638 $ 17,928 $ 12,466 $ 7,872
Costs and expenses:
Cost of revenue 5,454 3,789 2,867 2,153 1,875
Research and development 7,754 5,919 4,816 2,666 1,415
Marketing and sales 4,725 3,772 2,725 1,680 997
General and administrative 2,517 1,731 1,295 973 781
Total costs and expenses 20,450 15,211 11,703 7,472 5,068
Income from operations 20,203 12,427 6,225 4,994 2,804
Interest and other income (expense), net 391 91 -31 -84 -50
Income before provision for income taxes 20,594 12,518 6,194 4,910 2,754
Provision for income taxes 4,660 2,301 2,506 1,970 1,254
Net income $ 15,934 $ 10,217 $ 3,688 $ 2,940 $ 1,500
Less: Net income attributable to participating
securities 14 29 19 15 9
Net income attributable to Class A and Class B
common stockholders $ 15,920 $ 10,188 $ 3,669 $ 2,925 $ 1,491
Earnings per share attributable to Class A and
Class B common stockholders:
Basic $ 5.49 $ 3.56 $ 1.31 $ 1.12 $ 0.62
Diluted $ 5.39 $ 3.49 $ 1.29 $ 1.10 $ 0.60
Weighted average shares used to compute earnings
per share attributable to Class A and Class B
common stockholders:
Basic 2,901 2,863 2,803 2,614 2,420
Diluted 2,956 2,925 2,853 2,664 2,517
Share-based compensation expense included in
costs and expenses:
Cost of revenue $ 178 $ 113 $ 81 $ 62 $ 42
Research and development 2,820 2,494 2,350 1,328 604
Marketing and sales 436 368 320 249 133
General and administrative 289 243 218 198 127
Total share-based compensation expense $ 3,723 $ 3,218 $ 2,969 $ 1,837 $ 906
• There has been a significant increase in net revenue over the last five years. The revenue
has increased by around 47% in the last fiscal year only. The increase in net revenue can
be attributed to the increasing investment of companies in social media marketing and
advertising.

• The net income has increased significantly over the last five years from $1500 million in
2013 to $15934 million in 2017.
• In the last two years, Facebook has managed to reduce its total costs and expenses to less
than 60% of total revenue.
• Research and development expenses contribute the most to total expenses which is not
surprising considering the business the company is in.
Snap Inc
SNAP INC.

2017 2016 2015
Assets
Current assets:
Cash and cash equivalents $3,34,063 $1,50,821 $6,40,810
Marketable securities 17,08,976 8,37,247 0
Net Accounts Receivable 2,79,473 1,62,659 44,325
Prepaid expenses and other current assets 44,282 29,958 7,429
Total current assets 23,66,794 11,79,985 6,92,564
Property and equipment,net 1,66,762 1,00,585 44,079
Intangible assets, net 1,66,473 75,982 43,230
Goodwill 6,39,882 3,19,137 1,33,944
Other assets 81,655 47,103 25,119
Total assets $34,21,566 $17,22,792 $9,38,936
Accounts payable, accrued expenses and other current liabilities $71,194 $8,419 $702
Accrued expenses and other current liabilities $2,75,062 $1,48,325 $1,55,556
Capital leases, short-term 0 0 0
Total current liabilities 3,46,256 1,56,744 1,56,258
Convertible notes 0 0 0
Capital leases, long-term 0 0 0
Deferred and other long-term tax liabilities, net 0 0 0
Total liabilities $4,29,239 $2,03,878 $1,74,791
Common stock $12 $5 $5
Additional paid-in capital 76,34,825 27,28,823 14,67,355
Accumulated other comprehensive loss 14,157 -2,057 -10,000
Accumulated deficit -46,56,667 -12,07,862 -6,93,219
Total stockholders' equity 29,22,327 15,18,914 7,64,145
Total liabilities and stockholders' equity $34,21,566 $17,22,792 $9,38,936
• Revenue has increased significantly in 2016 and 2017 as compared to 2015 and 2016
respectively. In 2016, Revenue increased by approximately 589% when compared to 2015
and by 104% when compared to 2016.
• The total costs and expenses as a percentage of net loss decreased in 2017 compared to
2016. In 2017, total costs and expenses as a percentage of net loss was approx. 125%
compared to 180% in 2016.
• The total costs and expenses increased drastically by around 366% in 2017 as compared
to 2016. Infact the drastic increase in costs and expenses is the reason for the significant
increase in loss in 2017 as compared to 2016.

Cash Flow
Twitter
TWITTER, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

2017 2016 2015 2014 2013
Cash flows from operating activities
Net loss -$1,08,063 -$4,56,873 -$5,21,031 $5,77,820 $6,45,323
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization expense 3,95,867 4,02,172 3,12,823 2,08,165 1,10,894
Stock-based compensation expense 4,33,806 6,15,233 6,82,118 6,31,597 6,00,367
Amortization of discount on convertible notes 80,061 74,660 69,185 18,823 0
Changes in bad debt provision 586 3,958 5,765 4,632 1,557
Deferred income taxes -6,415 -4,775 -28,125 -9,609 -8,902
Impairment of investments in privately-held companies 62,439 4,000 0 0 0
Non-cash restructuring 2,260 25,934 -3,194 0 0
Other adjustments 2,907 16,150 1,438 7,983 4,161
Changes in assets and liabilities, net of assets acquired and liabilities
assumed from acquisitions:
Accounts receivable 2,668 -22,969 -2,16,585 -1,77,583 -1,12,060
Prepaid expenses and other assets -13,974 7,101 -50,170 -1,65,395 -12,045
Accounts payable 8,371 -7,112 76,355 18,059 7,957
Accrued and other liabilities -29,304 1,05,576 54,487 1,22,944 54,792
Net cash provided by operating activities 8,31,209 7,63,055 3,83,066 81,796 1,398
Cash flows from investing activities
Purchases of property and equipment -1,60,742 -2,18,657 -3,47,280 -2,01,630 -75,744
Proceeds from sales of property and equipment 2,783 0 0 0 0
Purchases of marketable securities -26,87,214 -29,08,611 -36,83,488 -29,37,033 -15,37,489
Proceeds from maturities of marketable securities 25,79,747 25,18,631 28,21,745 20,29,518 3,55,270
Proceeds from sales of marketable securities 1,24,826 1,83,154 3,83,413 1,88,092 42,816
Proceeds from sales of long-lived assets 35,000 0 0 0 0
Changes in restricted cash 3,594 -4,760 -3,549 -11,042 -10,847
Purchases of investments in privately-held companies -825 -81,502 -10,500 0 0
Business combinations, net of cash acquired 0 -85,082 -51,644 -1,63,477 -8,072
Other investing activities -10,101 -1,181 -11,118 -1,700 -36,000
Net cash used in investing activities -1,12,932 -5,98,008 -9,02,421 -10,97,272 -13,06,066
Cash flows from financing activities
Net proceeds upon issuance of common stock upon initial public offering 0 0 0 0 20,18,579
Proceeds from issuance of convertible notes 0 0 0 18,89,000 0
Convertible notes initial issuance discount 0 0 0 -28,810 0
Purchases of convertible notes hedges 0 0 0 -4,07,169 0
Purchases from issuance of warrants 0 0 0 2,89,272 0
Taxes paid related to net share settlement of equity awards -8,962 -15,598 -11,101 -17,053 -14,637
Payments of capital lease obligations -1,02,775 -1,00,558 -1,17,535 -1,03,135 -70,445
Proceeds from exercise of stock options 9,444 7,540 17,361 28,658 8,679
Proceeds from issuances of common stock under employee stock purchase 23,920 24,431 39,295 42,402 0
plan
Other financing activities 0 210 8,982 -1,443 0
Net cash used in financing activities -78,373 -83,975 -62,998 16,91,722 19,42,176
Net increase (decrease) in cash and cash equivalents 6,39,904 81,072 -5,82,353 6,76,246 6,37,508
Foreign exchange effect on cash and cash equivalents 9,911 -3,945 -16,900 -6,532 174
Cash and cash equivalents at beginning of period 9,88,598 9,11,471 15,10,724 8,41,010 2,03,328
Cash and cash equivalents at end of period $16,38,413 $9,88,598 $9,11,471 $15,10,724 $8,41,010
Supplemental cash flow data
Interest paid in cash $13,990 $12,953 $15,985 $10,000 $6,850
Taxes paid in cash $16,216 $14,532 $8,229 $14,895 $2,391
Supplemental disclosures of non-cash investing and financing activities
Conversion of preferred stock to common stock $0 $0 $0 $0 $8,72,536
Common stock issued in connection with acquisitions $0 $1,341 $5,16,538 $1,47,958 $3,31,766
Equipment purchases under capital leases $1,23,235 $1,00,281 $31,215 $1,40,685 $1,55,722
Changes in accrued property and equipment purchases $16,387 $5,738 $3,902 $6,562 -$1,602
Unpaid deferred offering costs $0 $0 $0 $0 $1,162

• Cash provided by operating activities consists of net loss adjusted for certain non-cash
items including depreciation and amortization, stock-based compensation, amortization of
discount on our Notes, deferred income taxes, impairment of investments in privately-held
companies, non-cash restructuring charges, as well as the effect of changes in working
capital and other activities. Cash provided by operating activities in 2017 was $831.2
million, an increase in cash inflow of $68.2 million compared to 2016.
• Cash provided by operating activities was driven by a net loss of $108.1 million, as
adjusted for the exclusion of non-cash expenses and other adjustments totaling $971.5
million, of which $433.8 million was related to stock-based compensation expense, $395.9
million was related to depreciation and amortization expense and $62.4 million was related
to other-than-temporary impairment on a cost-method investment, and the effect of
changes in working capital and other carrying balances that resulted in cash outflows of
$32.2 million
• Cash flow from investing activities consist of purchases of property and equipment,
particularly purchases of servers and networking equipment, leasehold improvements for
our facilities, purchases and disposal of marketable securities, strategic investments in
privately-held companies, acquisitions of businesses and other activities. Cash used in
investing activities in 2017 was $112.9 million, a decrease in cash outflow of $485.1
million compared to 2016.
• The change in cash flow from investing activities was primarily due to a $221.4 million
decrease in the purchases of marketable securities, a $80.7 million decrease in purchases
of investments in privately-held companies, a net $85.1 million decrease in cash used in
business combinations, a $57.9 million decrease in purchases of property and equipment,
a $35.0 million increase in proceeds from sale of long-lived assets, a $2.8 million increase
in proceeds from sales and maturities of marketable securities, and a $2.8 million increase
in proceeds from sales of property and equipment, offset by a $0.6 million increase in
expenditures on other investing activities.
• The company anticipates making capital expenditures in 2018 of approximately $375
million to $450 million, a portion of which it may finance through capital leases, as it
continues to expand its co-located data centers.
• Cash flow from financing activities consist of issuances of securities, including common
stock issued under our employee stock purchase plan, capital lease financing and stock
option exercises by employees and other service providers. Cash used in financing
activities in 2017 was $78.4 million, a decrease in cash outflow of $5.6 million compared
to 2016.
• The decrease in cash outflow from financing activities was due to a $6.4 million decrease
in taxes paid related to net share settlement of equity awards and other activities and a $1.9
million increase in proceeds from option exercises. These decreases were offset by a $2.2
million increase in payments of capital lease obligations and a $0.5 million decrease in
proceeds from the issuance of shares of stock from ESPP.
• Every year there has been a net inflow of cash.

Facebook
FACEBOOK, INC.
(In millions)
2017 2016 2015 2014 2013
Net income $ 15,934 $ 10,217 $ 3,688 $ 2,940 $ 1,500
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 3,025 2,342 1,945 1,243 1,011
Lease abandonment 0 0 0 -31 117
Share-based compensation 3,723 3,218 2,960 1,786 906
Deferred income taxes -377 -457 -795 -210 -37
Tax benefit from share-based award activity 0 0 1,721 1,853 602
Excess tax benefit from share based award activity 0 0 0 -1,869 -609
Other 24 30 17 7 56
Changes in assets and liabilities:
Accounts receivable -1,609 -1,489 -973 -610 -378
Prepaid expenses and other current assets -192 -159 -144 -123 355
Other assets 154 14 -3 -216 -142
Accounts payable 43 14 18 31 26
Partners payable 95 67 17 -28 12
Accrued expenses and other current liabilities 309 1,014 513 328 -38
Deferred revenue and deposits 4 35 -9 10 8
Other liabilities 3,083 1,262 1,365 346 833
Net cash provided by operating activities 24,216 16,108 10,320 5,457 4,222
Purchases of property and equipment -6,733 -4,491 -2,523 -1,831 -1,362
Purchases of marketable securities -25,682 -22,341 -15,938 -9,104 -7,433
Sales of marketable securities 9,444 13,894 6,928 8,438 2,988
Maturities of marketable securities 2,988 1,261 2,310 1,909 3,563
Acquisitions of businesses, net of cash -122 -123 -313 -4,975 -368
acquired, and purchases of intangible assets
Change in restricted cash and deposits 67 61 102 -348 -11
Other investing activities,net -2 -1
Net cash used in investing activities -20,038 -11,739 -9,434 -5,913 -2,624
Net proceeds from issuance of common stock 0 1,478
Taxes paid related to net share settlement of -3,246 -6 -20 -73 -889
equity awards
Proceeds from exercise of stock options 0 0 0 18 26
Proceeds from long-term debt, net of issuance cost 0 0 0 0 0
Repayment of long-term debt 0 0 0 0 -1,500
Proceeds from sale and lease-back transactions 0 0 0 0 0
Principal payments on capital lease and other 0 -312 -119 -243 -391
financing obligations
Excess tax benefit from share based award activity 0 0 0 1,869 609
Repurchases of Class A common stock -1,976 0 0 0 0
Other financing activities, net -13 8 0 0 0
Net cash used in financing activities -5,235 -310 -139 1,571 -667
Effect of exchange rate changes on cash and cash 233 -63 -155 -123 8
equivalents
Net (decrease) increase in cash and cash -824 3,996 592 992 939
equivalents
Cash and cash equivalents at beginning of period 8,903 4,907 4,315 3,323 2,384
Cash and cash equivalents at end of period $8,079 $8,903 $4,907 $4,315 $3,323

Supplemental cash flow data

Cash paid during the period for:
Interest $0 $11 $10 $14 $38
Income taxes, net $2,117 $1,210 $270 $184 $82
Cash received during the period for:
Income taxes $0 $0 $0 $6 $421
Non-cash investing and financing activities:
Net change in accounts payable, accrued expenses
and other current liabilities, and other
liabilities related to property and equipment
additions $ 363 $ 272 $ 88 $ 91 $ 53
Property and equipment acquired under capital leases $0 $0 $0 $0 $11
Promissory note payable issued in connection
with an acquisition $0 $0 $ 198 $0 $0
Settlement of acquisition-related contingent
consideration liability $ 102 $ 33 $0 $0 $0
Change in unsettled repurchases of Class A
common stock $ 94 $0 $0 $0 $0
Fair value of shares related to acquisition of business $0 $0 $0 $14,344 $77
• The cash inflow from operating activities has increased over the past five years. The
increase in net income has contributed most to the increase in cash flow from operating
activities.
• The net cash outflow from investing activities has increased over the past five years. The
cash outflow is due to increases in purchase of property and equipment and marketeable
securities.
• The net cash outflow from financing activities has increased over the past five years. The
increase is due to the fact that the company has paid a huge amount of tax in year 2017.
Also, the company has been making consistent principal payments on capital lease and
other obligations.
• However, due to the huge contribution of cash flow from operating activities, there has
been a net cash inflow each year.
• Also, there has been an increase in the net cash paid during each period for income taxes.

Snap Inc
SNAP INC.
(In thousands)

2017 2016 2015
Net loss -$34,45,066 -$5,14,643 -$3,72,893
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization expense 61,288 29,115 15,307
Stock-based compensation expense 26,39,895 31,842 73,524
Deferred income taxes -17,490 -7,952 -7,700
Excess inventory reserve and related asset impairment 21,997 0 0
Other adjustments -6,356 889 626
Changes in assets and liabilities, net of effect of acquisitions:
Accounts receivable, net of allowance -1,04,357 -1,18,434 -41,905
Prepaid expenses and other current assets -39,783 -20,521 -6,590
Other assets -4,771 -5,064 -4,451
Accounts payable 49,696 6,486 -6,724
Accrued expenses and other liabilities 1,00,988 -19,728 40,026
Net cash provided by operating activities -7,34,667 -6,11,245 -3,06,622
Purchases of property and equipment -84,518 -66,441 -19,205
Purchases of intangible assets -8,107 -572 -9,100
Non marketeable investments -10,030 -6,513 -9,551
Cash paid for acquisitions, net of cash acquired -3,86,011 -1,04,001 -48,730
Issuance of notes receivable from officers/stockholders 0 -15,000 -7,500
Repayment of notes receivable from officers/stockholders 0 15,000 0
Purchases of marketeable securities -38,62,637 -15,65,347 0
Sale of marketeable securities 5,11,068 1,95,898 0
Maturities of marketeable securities 24,83,225 5,32,690 0
Change in restricted cash 10,271 -7,048 -1,856
Other investing activities 0 0 -5,000
Net cash used in investing activities -13,46,739 -10,21,334 -1,00,942
Proceeds from the exercise of stock options 11,379 731 60
Stock repurchases from employees for tax withholdings -3,94,156 0 0
Proceeds from issuance of class A common stock in initial public offering, net of
underwriting commissions 26,57,797 0 0
Repurchase of class B voting common stock and series FP voting preferred stock 0 -10,593 -1,000
Proceeds from issuance of preferred stock, net of issuance costs 0 11,57,147 6,51,306
Borrowings from revolving credit facility 0 5,000 0
Principal payments on revolving credit facility 0 -5,000 0
Payments of initial public offering costs -9,672 -5,395 0
Net cash used in financing activities 22,65,348 11,41,890 6,50,366
Change in cash and cash equivalents 1,83,942 -4,90,689 2,42,802
Cash and cash equivalents at beginning of period 1,50,121 6,40,810 3,98,008
Cash and cash equivalents at end of period $3,34,063 $1,50,121 $6,40,810
Supplemental disclosures
Cash paid for income taxes $6,226 $1,686 $3
Supplemental disclosures of non-cash activities
Issuance of class B voting common stock related to acquisitions $0 $96,145 $29,270
Assumed equity awards in acquisitions $3,911 $0 $0
Purchase consideration liabilities related to acquisitions $16,486 $21,085 $0
Repurchase of class B voting common stock and series FP voting preferred stock in
exchange for notes receivable from officers/stockholders $0 $13,500 $0
Construction in progress related to financial lease obligations $1,451 $1,789 $6,305
Net change in accounts payable and accrued expenses and other current liabilities
related to property and equipment additions $13,139 $2,084 $3,174
Deferred offering costs accrued,unpaid $0 $1,739 $0

• The outflow of cash from operating activities has increased consistently over the past few
years. This outflow has been primarily due to the increase in net loss over the past three
years.
• There has been a net outflow of cash from investing activities over the past three years.
Although there has been inflow of cash from the sale of marketable securities, this inflow
has been offset by the outflow of cash for purchase of marketable securities, property and
equipment, and also payment for acquisitions.
• There has been a consistent increase in the inflow of cash from financing activities. The
inflow has been due to proceeds from issuance of common stock and preferred stock.
• There has been a net inflow of cash in each of the last three years.

Financial Ratio Analysis

Liquidity Ratio
Current Ratio
The current ratio is a liquidity ratio that measures a company's ability to pay short-term and
long-term obligations. To gauge this ability, the current ratio considers the current total assets
of a company (both liquid and illiquid) relative to that company’s current total liabilities. The
formula for calculating a company’s current ratio is:
Current Ratio = Current Assets / Current Liabilities
Company Dec-17 Dec-16 Dec-15

Twitter 9.12 7.97 8.66
Facebook 12.92 11.97 11.25
Snap Inc 6.84 7.53 4.43
Figure 11: Current ratio for the three companies for last three years
Industry Average (December 2017)- 5.76

Facebook has the highest current ratio, almost twice the industry average. Twitter also has a
high current ratio. However, a high current ratio doesn’t always indicate that the company is in
a good position to pay its current liabilities. It depends on the nature of individual current assets
and liabilities. Both Facebook and Twitter have a high portion of liquid assets and hence are in
a good position to pay their current liabilities. Although Snap Inc had a lower current ratio than
industry average in December 2015, however in 2016 and 2017 Snap Inc also has been able to
achieve a healthy current ratio.

Acid Test Ratio
The acid-test ratio or quick ratio is a strong indicator of whether a firm has sufficient short-
term assets to cover its immediate liabilities. This metric is more robust than the current ratio,
also known as the working capital ratio, since it ignores illiquid assets such as inventory.
The formula to calculate acid test ratio or quick ratio is as follows
Acid-Test Ratio = Total Quick Assets / Current Liabilities
Twitter 8.69 7.58 8.17
Facebook 12.64 11.63 10.91
Snap Inc 6.71 7.34 4.38
Figure 12: Acid Test/ Quick Ratio for the three companies for last three years
Industry Average (December 2017)-1.67

All the three firms have a higher quick ratio than the industry average. This indicates that all
the three firms (Facebook, Twitter and Snap Inc) have the ability to pay off their short-term
debts easily. Also, quick ratio is an indicator of liquidity. A high quick ratio is looked at
favorably by creditors as it indicates ease of recovering debt.
Solvency Ratio
Debt Equity Ratio
Debt/Equity (D/E) Ratio, calculated by dividing a company’s total liabilities by its

stockholders' equity, is a debt ratio used to measure a company's financial leverage. The D/E
ratio indicates how much debt a company is using to finance its assets relative to the value of
shareholders’ equity.
The formula for calculating Debt Equity (D/E) Ratio is:

Debt/Equity Ratio = Total Liabilities / Shareholders' Equity
The result can be expressed either as a number or as a percentage. The debt/equity ratio is also
referred to as a risk or gearing ratio.

Twitter 0.47 0.49 0.48
Facebook 0.14 0.10 0.12
Snap Inc 0.15 0.13 0.23
Figure 13: Debt Equity ratio for the three companies for last three years
Industry Average- 0.65
Of all the three companies, Twitter has the highest Debt Equity Ratio. On the other hand,
Facebook has the lowest Debt Equity Ratio. A low debt equity ratio is favorable for creditors
as it indicates that most of the money is coming from shareholders. Also, all the three
companies have debt to equity ratio lower than the industry average which indicates that all the
companies have lesser long-term debt as compared to equity.
Turnover Ratios
Asset Turnover Ratio
Asset turnover ratio measures the value of a company’s sales or revenues generated relative to
the value of its total assets. The Asset Turnover ratio can often be used as an indicator of the
efficiency with which a company is deploying its assets in generating revenue.The formula for
calculating the asset turnover ratio is:
Asset Turnover= Sales/Average Total Assets


Twitter 0.33 0.37 0.34
Facebook 0.48 0.43 0.36
Snap Inc 0.24 0.23 0.06
Figure 14: Asset Turnover Ratio for the three companies for last three years

Among the three companies, Facebook has the highest turnover ratio which indicates that it
uses its assets most efficiently to generate revenue. However, all the three companies have a
lower asset turnover ratio than the industry average. However, Facebook and Snap Inc have
improved their Asset Turnover ratio in 2016 and 2017 whereas the Asset Turnover ratio for
Twitter has not remained almost the same.
Debtors Turnover Ratio
The debtors or receivables turnover ratio is an accounting measure used to quantify a firm's
effectiveness in extending credit and in collecting debts on that credit. The debtors’ turnover
ratio is an activity ratio measuring how efficiently a firm uses its assets.
The formula for calculating debtors’ turnover ratio is as follows:
Debtors Turnover Ratio= Net Credit Sales/Average Accounts Receivable

Twitter 3.68 3.89 3.47
Facebook 6.97 6.92 7.01
Snap Inc 2.95 2.49 1.32

Figure 15: Debt Turnover Ratio for the three companies for last three years

All the three companies have lower ratio than the industry average. Among the three
companies, Facebook has the highest debtors’ turnover ratio and has managed to maintain this
ratio at a consistent level over the past three years. Also, it means that Facebook is able to
collect its debts in the shortest period of time when compared to its competitors. Snap Inc and
Twitter both need to look at their debt collection methods as their debtor ratio is between 3 and
4 which indicates a receivables collection period of more than a year.
Creditors Turnover Ratio
The creditors turnover or accounts payable turnover ratio is a short-term liquidity measure used
to quantify the rate at which a company pays off its suppliers. Creditors turnover ratio is
calculated by taking the total purchases made from suppliers, or cost of sales, and dividing it
by the average accounts payable amount during the same period.
The formula for calculating creditors turnover ratio is:
Creditors Turnover Ratio=Total Supplier Purchases or COGS/Average Accounts
Payable

Twitter 5.04 7.63 5.44
Facebook 14.35 12.55 14.63
Snap Inc 10.08 53.65 259.75

Figure 16: Creditor Turnover Ratio for the three companies for last three years
Of all the three companies, Twitter has the lowest creditor turnover ratio which indicates that
it takes the longest amount of time to make payments to creditors. Also, a low creditors turnover
ratio may indicate high trust of creditors in the company. Snap Inc has a very high creditors
turnover ratio. Although Snap Inc had a low creditors turnover ratio in 2015, however it
increased significantly in 2016 and in 2017. This could be due to the inability of Snap Inc to
make payments to creditors in the beginning and hence the declining trust of creditors in the
company.
Profitability Ratios
Gross Profit Margin
Gross profit margin is a financial metric used to assess a company's financial health and
business model by revealing the proportion of money left over from revenues after accounting
for the cost of goods sold (COGS). Gross profit margin, also known as gross margin, is
calculated by dividing gross profit by revenues.
Gross Margin (%)= (Gross Profit/Revenue) X 100

Twitter 64.75 63.15 67.12
Facebook 86.58 86.29 84.01
Snap Inc 13.03 -11.66 -210.83

Figure 17: Gross Margin for the three companies for last three years
Industry Average (December 2017)-62.79%

Facebook has a much higher gross margin than the industry average which is not surprising
considering the fact that it is the market leader. Also, Facebook has managed to maintain a
consistent gross margin over the last three years. Twitter has almost the same gross margin as
the industry average and has managed to maintain a consistent gross margin over the last three
years. Snap Inc had a highly negative gross margin in 2015 but has managed to achieve a
positive gross margin in 2017 indicating that the company is growing and also taking steps to
improve its financial health and profitability.
Net Profit Margin
Net profit margin, or net margin, is equal to net income or profits divided by total revenue and
represents how much profit each dollar of sales generates.
The formula to calculate net profit margin is as follows:
Net Profit Margin (%)= (Net Profit or Loss/ Total Revenues) X 100

Twitter -4.42 -18.06 -23.49
Facebook 39.20 36.97 20.57
Snap Inc -417.61 -127.24 -635.65

Figure 18: Net Profit Margin for the three companies for last three years
Industry Average (December 2017)- 16.45 %

Of all the three companies, only Facebook has a positive net margin and higher than the
industry average which has been increasing consistently. Twitter has a negative net margin but
it has improved its net margin in the past three years which indicates that it has taken steps to
improve its profitability. This has been possible because it has managed to decrease its costs
and expenses in the last three years. However, Snap Inc has a very high negative net profit
margin which is a cause of concern for the company and indicates that the company has to
work towards on making its operations more efficient.
Return on Assets
Return on assets (ROA) is an indicator of how profitable a company is relative to its total assets.
ROA gives a manager, investor, or analyst an idea as to how efficient a company's management
is at using its assets to generate earnings. Return on assets is displayed as a percentage and its
calculated as:
ROA = Net Income / Total Assets

Twitter 0.52 -5.34 -6.99
Facebook 18.85 15.73 7.46
Snap Inc -100.69 -29.87 -39.71

Figure 19: Return on Asset for the three companies for last three years
Again, as in the case with most of the other ratios, Facebook has the highest ROA and has been
able to achieve a ROA higher than the industry average in 2016 and 2017. This indicates that
Facebook is more effective in utilising its assets to generate income. Although Twitter has
managed to achieve a positive ROA in 2017, still is much lower than the industry average.
Snap Inc has a very high negative ROA and in fact its ROA has decreased over the past three
years which indicates that it has not been able to translate its investments into profits.
Return on Equity (ROE)
Return on equity (ROE) is the amount of net income returned as a percentage

of shareholders equity. Return on equity (also known as "return on net worth" [RONW])
measures a corporation's profitability by revealing how much profit a company generates with
the money shareholders have invested.
ROE is expressed as a percentage and calculated as:
Return on Equity (%) = Net Income/Shareholder's Equity X 100

Twitter 0.77 -7.97 -10.30
Facebook 21.43 17.26 8.34
Snap Inc -117.89 -33.88 -48.80

Figure 20: Return on Equity for the three companies for last three years
All the three companies have a lower ROE than the industry average. However, Facebook has
managed to increase its ROE to a figure close to the industry average. Twitter has managed to
achieve a positive ROE in 2017 but it is still much lower than the industry average. Snap Inc
ROE has decreased over the past three years. A high ROE indicates that the company is turning
the cash put into business into greater gains and growth both for the company and the investors.
On the contrary, a low ROE indicates that the company has not been able to translate the cash
put into business into gains or growth.
Earnings Per Share (EPS)
Earnings per share (EPS) is the portion of a company's profit allocated to each outstanding
share of common stock. Earnings per share serves as an indicator of a company's profitability.
EPS is calculated as:
EPS = (Net Income - Dividends on Preferred Stock) / Average Outstanding Shares

Twitter -0.15 -0.65 -0.79
Facebook 5.49 3.56 1.31
Snap Inc -2.95 -0.64 -0.51

Figure 21: Earning per Share for the three companies for last three years
Industry Average- 12.91

All the three companies have a lower EPS than the industry average. However, the EPS of
Facebook and Twitter has been increasing consistently. On the other hand, the EPS of Snap
has decreased on a consistent basis. This indicates that the stockholders and investors are more
inclined towards investing in Facebook and Twitter rather than in Snap. Hence, Snap needs to
look at improving its overall profitability in order to improve its EPS.
Market Analysis
Company Last Price % Change 52 wk high 52 wk low Market Cap

Facebook $198.45 2.97 $203.55 $148 571.209
billion
Twitter $45.06 2.67 $47.79 $15.67 33.915
billion
Snap Inc $13.21 0.46 $21.22 $10.50 16.62 billion

References
1. Annual Reports of Facebook, Twitter and Snapchat
2. www.facebook.com
3. www.twitter.com
4. www.snapchat.com
5. http://www.wikipedia.com
6. https://in.investing.com
7. https://www.marketwatch.com
8. https://www.bloomberg.com
9. https://www.smartinsights.com/
10. https://www.statista.com/
11. https://www.adweek.com/digital

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FINANCIAL ANALYSIS OF

SOCIAL MEDIA INDUSTRY

Social Media Industry

Social Media Industry

Figure 1: Digital Around the world

Social Media Industry

Social Media Industry

Figure 2: Average minutes spent per visitor

Macroeconomic Factors Affecting Social Media Industry

Social Media Industry

Social Media Industry

Major Players in the Social Media Industry

Launched February 2004, Cambridge, Massachusetts, United States

Launched July 15, 2006; 11 years ago

Social Media Industry

Headquarters San Francisco, California, United States

Launched September 2011; 6 years ago

Social Media Industry

Figure 3: Business Model of Social Media Industry

Below is a brief of the various branches of a Social Media Company

Social Media Industry

R&D and Product Development

IT infrastructure Development and Maintenance

Social Media Industry

Porter’s 5 Forces Model

Figure 4: Porter's Five Forces impacting Social Media Industry

Social Media Industry

Major Accounting Policies

Social Media Industry

customer, which is assessed

Social Media Industry

International Accounting Standard for Social Media Industries:

Foreign Currency Transactions

Cash and Accounts Receivable

Revenue Recognition and Revenue Sources

• There is persuasive evidence of an arrangement

Social Media Industry

3rd party facebook

Figure 5: Facebook's revenue model

Figure 6: Revenue generation model of Facebook

Social Media Industry

Figure 7: Twitter's revenue model

Social Media Industry

Figure 8: Snapchat's revenue model

Research and development

Social Media Industry

Marketing and sales

General and administrative

Social Media Industry

International Financial Reporting Standards (IFRS)

1. Permissible inventory cost flow method in US GAAP and IFRS

2. Calculation of impairment loss under US GAAP and IFRS

Carrying value > Future value Carrying Value > Recoverable

Loss= Carrying value of

Figure 9: Impairment loss under US GAAP and IFRS

Social Media Industry

3. Categorisation of Business Combination in US GAAP & IFRS

Figure 10: Business Combination in US GAAP & IFRS

Social Media Industry

4. Treatment of Lease – Lessee’s perspective

Any 1 from the below:

Social Media Industry

Financial Statements Analysis