There’s 4 broad buckets of costs for most companies - g&a (general and administrative), s&m (sales and marketing), r&d, and cost of revenue.

The cost has to be classified into one of these buckets and so the CFO was probably just clarifying into which bucket they lumped it.

This is part of the point of generalized accounting is so everyone gets a similar basis compare companies.

Oh I see, thanks!

> The cost has to be classified into one of these buckets

Either PR was not consulted or they don’t understand how this comes off.

I'm not fan of Facebook, but here it is in context:

> Total expenses were $12.2 billion in Q4, up 34%.

> Cost of revenue increased 25% and the growth was driven primarily by depreciation related to our infrastructure spend.

> R&D grew 36% and was driven primarily by increased investments in core product as well as our innovation efforts, particularly in AR/VR.

> Marketing and Sales grew 23% and was driven primarily by consumer and growth marketing.

> Finally, G&A grew 87%, largely driven by higher legal fees & settlements. This includes charges related to a $550M settlement in principle we reached this month in connection with the Illinois Biometric Information Privacy Act litigation.

This is standard for earnings calls. The point is for the CFO to add detail to the generally accepted accounting principles (GAAP) financial numbers so that investors understand why they changed. As @joez mentioned, companies have to report financial numbers according to GAAP, which mandates that companies disaggregate costs into specific areas. Both good and bad companies face lawsuits all the time, and the legal fees and settlements will show up in G&A. If G&A expenses change in an unexpected way, it is expected that the company will communicate why.

There's definitely a lot that goes into crafting these calls, but having listened to and read more than a thousand of them, I don't think there was anything poorly done in this specific example.

It's an earnings call. He put it in the terms his audience expected. Nobody made any deal out of it except one HN commenter. So I think it's okay

As long as the nature of punishment is a fine, it can be modeled and a cost-benefit analysis can be performed. If the forecasted economic benefit exceeds the cost, then the action should be taken, or so the theory goes.

This happens in all industries. Part of the reason many legal settlements lead to a massive jump in stock price is that companies reserve funds for expected litigation. If FB models the settlement cost to $1B and it turns out to be $550M, that's a good result

> As long as the nature of punishment is a fine, it can be modeled and a cost-benefit analysis can be performed. If the forecasted economic benefit exceeds the cost, then the action should be taken, or so the theory goes.

The theory has limits though. If, in discovery, prosecutors find out that the company intentionally did something illegal because it believed that the cost of the fine was less than the benefit of the illegal action, then the fine is usually much higher and the specific executives involved often face much stiffer penalties.

There is a difference between an intentional plot to commit one specific illegal act or tort, and recognition that torts and misbehavior will happen in a large enough organization and budgeting/insuring for it. This happens whether or not it’s believed paying damages is cheaper than fixing the problems.

Agreed. I didn't say the theory was invalid, just that it has limits!

True! Sorry about that.

Do you know of any examples when that has actually happened? Genuinely curious, because I can't think of any.

I think a favorable reading is that he described the category. Facebook tracked that fine under "general and administrative".

Every large company is juggling multiple lawsuits at any given time. So, yes.

> So he literally just framed this as a 'cost of doing business'?

How would you prefer he frame it?

Maybe I'm jaded or cynical now