Going to explore debt.

To do that, we're going to have a look at Tesla's accounts.

Let's look at Tesla's year end and let's look at the non amended version, so this basic 10 K down here.

If we look at the table of contents, which we'd find fairly early, we're looking for the balance sheet.

You can see they've got a nice summary just for the financial statements and we can click into the balance sheet.

Now, Tesla has quite a complex debt situation.

It uses debt to fuel some of its unusual forays into energy and drilling, that kind of thing.

And it also uses debt in unusual ways to form a sort of bank for its leasing part of its automotive business.

You can see that level of detail is not being captured particularly well in the balance sheet.

And so if we wanted to understand Tesla and its diverse debt package in a bit more detail, we would want a note.

If we go back to the table of contents and follow the financial statements, you can see that there's notes here and we're hoping that there's a contents page for the notes, but unfortunately we are disappointed.

After a fair bit of scrolling, we'll find note 10 debt.

You can find this on page 73 of their 20, 24, 10 K.

Down here. You can see a lot of detail around the debt.

It's possible to see what kind of debt we have, what its purpose is, and what breakdown it has between current and long-term portion.

It's very helpful. Note there's something interesting going on here that we should explore if we have a look at the total debt.

And then can you see this is a kind of total, total column.

All we've got is two numbers here of total debt split into the current and long term portions IE payable within a year and payable over a year.

Now you can see I've got my pocket calculator out and I'm gonna add together the current portion to the non-current portion.

You can see that adds up to this number here, 7 8, 7 8, and if you look at it really carefully, that does not add up to the total column.

So there's something unusual going on here, which is quite common to accounts and important for you to understand.

This is not a mistake.

What we're looking at here is probably what's called the original issue discount, or OID.

You might see this mentioned as unamortized issue cost as well.

This is usually a debt fee.

What happens is it behaves in a very unusual way in the accounts.

Let's find a company that shows it really clearly.

We're going to go back to Keurig, which has excellent reporting, and we're going to go to their year-end accounts.

These are a real pleasure to navigate.

We'll go to the financial statements then we are looking at their excellent table here.

Note three is long-term obligations, which seems to fit the bill for debt.

If we scroll through the initial analysis, you can see an excellent breakdown of what sort of debt is being held by Keurig.

Down at the bottom you can see an adjustment from principal amount to carrying amount. With a little note, if we read the note carefully, it says the carrying amount includes unamortized discounts, which are the OS or fees that we talked about earlier.

The OID is actually being treated as an unusual negative debt.

It would amortize slowly and add to the balance sheet debt balance.

If KDP didn't issue any more debt, we'd slowly see that 1 4 5 become zero and the carrying amount on the balance sheet would rise to this number here, 13 0 9 3, which is the real amount that's actually owed.

So a couple of conclusions then.

First, if debt is highly significant, you need to be careful of the balance sheet figures which can hide accounting issues like the OID.

Second conclusion is that reading the footnote is an excellent idea for debt.