I tried to attached the link to the SEC website with the link showing Zillows response to the SEC questions but yahoo doesn't allow such links anymore. It will be interesting when Zillow reports its next quarterly results if there are any prior period accounting adjustments following the questions raised by the SEC.
Whilst it seems that most publicity has been given to the Revenue 'churn' questions, I was particularly interested in the discussion about any changes in accounting treatment in respect of Goodwill and Intangible Assets, and even more so with the Core Logic patent settlement which was structured as a $6.1m License Agreement. The phasing of that settlement with only $458k expensed in 2012 and over $1m for subsequent years, was always going to attract attention and it will be interesting if the SEC swallow Zillows flaky justification.
It is good to know that the SEC has Zillow on its radar and will no doubt be reviewing future returns in detail. As Citron Research highlighted last week Zillow has many issues that investors need to understand, and this is a big step in that process.
Go to SEC.Gov and search for Zillow and read the correspondence dated August 23rd to read the full response from the Zillow CFO
On March 2nd this year Zillow explained in its 10K Filing the settlement it reached with Core Logic over the patent lawsuit filed by Core Logic. The link to this is attached as it is an area investigated by the SEC in the news released today by the SEC into several aspects of Zillows accounting treatment. As I mentioned in the previous post, it will be interesting if the SEC investigation result in any changes to the Core Logic settlement accounting treatment and if any prior period accounting adjustments that are enforced.
Just in case the link doesn't work here is part of the text in the March 2nd post; "Looks like Zillow may have agreed a $6.1m settlement with First American Core Logic. Interesting that they don't 'connect the dots' between the previous 10-Q and the current 10-Q from which the attached details were extracted. I am more interested in the 'payment phasing' as it seems Zillow is giving themselves a P&L benefit with a $458k charge in 2012, increasing to over $1m in the next 4 years. Let's hope the Analysts ask questions about this topic to clarify exactly what the payment is for and the basis for the payment profile so that any suspicion of accounting irregularity is eliminated. It will be interesting how First American Core Logic account for this transaction as well. I am sure if there is NO connection that Zillow will clarify this matter seeing as they left the 10-Q statement so vague. "In April 2012, we entered into an agreement for a non-cancelable purchase commitment for content related to our website. The amount due for this content is as follows (in thousands): 2012 $458 2013 $1,100 2014 $1,142 2015 $1,242 2016 $1,342 All future years $816 Total future purchase commitments $6,100"