An Interesting Accounting Move


Equinix, a Foster City, Calif.-based data center hosting company that bought Switch & Data earlier this year, provides an interesting look into an accounting measure that appears to have cut its reported losses in half.

According to the company's most recent 10-Q:

"During the year ended December 31, 2009, the Company reassessed the estimated useful lives of certain of its property, plant and equipment as part of a review of the related assumptions. As a result, the estimated useful lives of certain of the Company's property, plant and equipment were affected.

"The Company undertook this review due to its determination that it was generally using certain of its existing assets longer than originally anticipated and, therefore, certain estimated useful lives have been lengthened. The change in the estimated useful lives of certain of the Company's property, plant and equipment was accounted for as a change in accounting estimate on a prospective basis effective July 1, 2009 under the accounting standard related to changes in accounting estimates."

This accounting change allowed Equinix to take less of a charge in its depreciation costs than it would have otherwise, according to the SEC filing. That added 5 cents per share to its earnings for its most recent quarter, in which it reported a loss of 5 cents per share.

So, voila: Equinix was able to cut its losses in half by going into its Excel spreadsheet and changing a macro. (The company didn't specify which equipment, property or plants it was getting a longer life out of, or by how much -- just that it was.)

Equinix is one of the bigger and more mature data center hosting companies, with scores of big customers ranging from AT&T to Time Warner Cable to Merrill Lynch. It also has been one of the most aggressive in building and geographically dispersing its data centers around the world -- the kind of measure that boosts performance and reliability. That's expensive, but it remains a key selling point for the company.

Analysts estimate that its revenue for next year will come in at around $1.54 billion.