Impact of GAAP rules on the comparability of LinkedIn income over time.

LinkedIn's September 30, 2016, Form 10-Q balance sheet data reported certain items very differently from the way that Microsoft allocated its purchase price to LinkedIn's assets and liabilities as of December 6, 2016.

Compare shareholder's equity as of September 30, 2016, to the purchase price paid by Microsoft of $27 billion.

a. What is the difference in the amount?

b. Why do you think that the balance sheet equity amount is so far below the amount Microsoft was willing to pay?

LINKEDIN CORPORATION TRENDED CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited) As of September 30, 2015 December 31, 2015 March 31, 2016 June 30, 2016 September 30, 2016 $ 2 ASSETS CURRENT ASSETS: Cash and cash equivalents Marketable securities Accounts receivable Deferred commissions Prepaid expenses Other current assets Total current assets Property and equipment, net Goodwill Intangible assets, net Other assets TOTAL ASSETS 631,725 $ 2,457,607 457,975 56,453 72,752 136,225 3,812,737 906,189 1,508,946 418,050 70,788 6,716,710 $ 546,237 $ 2,573,145 603,060 87,706 62,992 61,949 3,935,089 1,047,005 759,451 $ ,400,187 582,726 80,783 76,414 68,835 ,968,396 1,139,032 1,597,268 334,048 170,623 7,209,367 S 719,807 $ 2.591,709 560,440 78,353 76,478 78,046 4,104,833 1,228,402 1,597,423 295,942 84,840 7,311,440 $ 697,113 2.667,883 541,325 72,290 79,104 45,298 4,103,013 1,508,480 1,609,492 262,986 72,441 7,556,412 3 1,507,093 373,087 148,925 7,011, 199 $ $ $ $ $ $ LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST, AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable Accrued liabilities Deferred revenue Total current liabilities CONVERTIBLE SENIOR NOTES, NET OTHER LONG-TERM LIABILITIES Total liabilities COMMITMENTS AND CONTINGENCIES REDEEMABLE NONCONTROLLING INTEREST STOCKHOLDERS' EQUITY: Class A and Class B common stock Additional paid-in capital 123,329 296,794 621,411 1,041,534 1,115,439 241,532 2,398,505 162,176 316,792 709,116 709,116 1,188,084 1,126,534 201, 128 2,515,746 161,523 $ 257,371 7 87,621 787,621 1,206,515 1,138,264 225,023 2,569,802 147,934 253,778 785,680 789 1,187,392 1,150,132 228,434 2,565,958 189,073 321,507 749,491 1,260,071 1,162,141 231,981 2,654,193 26,296 26,810 27,321 2 7,846 28,400 13 13 4,405,911 13 4,588,578 4,779,628 13 4,989,710 5,141,257 Accumulated other comprehensive income Accumulated deficit Total stockholders' equity TOTAL LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST, AND STOCKHOLDERS' EQUITY 6,632 (120,647) 4,291,909 9,124 (129,072) 4,468,643 7,502 (174,899) 4,612,244 22,077 (294,164) 4,717,636 18,153 (285,605) 4,873,819 $ 6,716,710 $ 7,011, 199 $ 7,209,367 $ 7,311,440 $ 7,556,412 LINKEDIN CORPORATION TRENDED CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited) As of September 30, 2015 December 31, 2015 March 31, 2016 June 30, 2016 September 30, 2016 $ 2 ASSETS CURRENT ASSETS: Cash and cash equivalents Marketable securities Accounts receivable Deferred commissions Prepaid expenses Other current assets Total current assets Property and equipment, net Goodwill Intangible assets, net Other assets TOTAL ASSETS 631,725 $ 2,457,607 457,975 56,453 72,752 136,225 3,812,737 906,189 1,508,946 418,050 70,788 6,716,710 $ 546,237 $ 2,573,145 603,060 87,706 62,992 61,949 3,935,089 1,047,005 759,451 $ ,400,187 582,726 80,783 76,414 68,835 ,968,396 1,139,032 1,597,268 334,048 170,623 7,209,367 S 719,807 $ 2.591,709 560,440 78,353 76,478 78,046 4,104,833 1,228,402 1,597,423 295,942 84,840 7,311,440 $ 697,113 2.667,883 541,325 72,290 79,104 45,298 4,103,013 1,508,480 1,609,492 262,986 72,441 7,556,412 3 1,507,093 373,087 148,925 7,011, 199 $ $ $ $ $ $ LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST, AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable Accrued liabilities Deferred revenue Total current liabilities CONVERTIBLE SENIOR NOTES, NET OTHER LONG-TERM LIABILITIES Total liabilities COMMITMENTS AND CONTINGENCIES REDEEMABLE NONCONTROLLING INTEREST STOCKHOLDERS' EQUITY: Class A and Class B common stock Additional paid-in capital 123,329 296,794 621,411 1,041,534 1,115,439 241,532 2,398,505 162,176 316,792 709,116 709,116 1,188,084 1,126,534 201, 128 2,515,746 161,523 $ 257,371 7 87,621 787,621 1,206,515 1,138,264 225,023 2,569,802 147,934 253,778 785,680 789 1,187,392 1,150,132 228,434 2,565,958 189,073 321,507 749,491 1,260,071 1,162,141 231,981 2,654,193 26,296 26,810 27,321 2 7,846 28,400 13 13 4,405,911 13 4,588,578 4,779,628 13 4,989,710 5,141,257 Accumulated other comprehensive income Accumulated deficit Total stockholders' equity TOTAL LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST, AND STOCKHOLDERS' EQUITY 6,632 (120,647) 4,291,909 9,124 (129,072) 4,468,643 7,502 (174,899) 4,612,244 22,077 (294,164) 4,717,636 18,153 (285,605) 4,873,819 $ 6,716,710 $ 7,011, 199 $ 7,209,367 $ 7,311,440 $ 7,556,412