The SEC Comment letter and response are not the end of the story. Stay tuned for the 10K and let's hope it is not delayed.
Note 2. Summary of Significant Accounting Policies
Resale value guarantee, page 10
6. We note your disclosure that in April 2013 you began offering resale value guarantees on certain sales financed through your banking partners. We also note you account for such transactions as operating leases. With regard to measurement of expense during the term of the operating lease, you disclose that you depreciate the cost of the respective operating lease vehicles less the resale value guarantee amount to cost of automotive sales over the contractual term of the guarantee program. Please explain to us the basis under GAAP for your use of this method, in which the depreciable basis excludes the resale value guarantee amount and in which the depreciation rate is not based on the useful life of the vehicles. In this regard, ASC 840-10-55-18 requires equipment to be depreciated following the manufacturer’s normal depreciation policy.
Response: The Company confirms that our operating lease vehicles are being depreciated following our normal depreciation policy. In accordance with ASC 360-10-35-4, our normal depreciation policy is to depreciate the cost of our fixed assets, less salvage value (if any), over the assets’ respective useful economic lives. We believe that for our operating lease vehicles, the useful economic life is consistent with the period under which the vehicle is leased. Accounting guidance is not specifically prescriptive as to whether the expected useful economic life or the expected life of the asset to the reporting entity should be used in circumstances such as this, but we analogize to the guidance provided in ASC 350-30-35, which suggests that the useful economic life is determined based on our expected use of these fixed assets which is to produce operating lease revenue over the expected operating lease.....
Lenovo has been looking for a way to enter the US markets in a meaningful way. Their best smartphone will compete at a lower price point than comparable phones from Apple. Sprint is the carrier that is well positioned to promote Lenovo. And NQ wins.