There was subtle announcement after SEC investigation was announced that GE would be restating 2016 and 2017 financials. Sorry, but this never a good thing. What else are these clowns going to uncover or expose to shareholders. What on earth did the GE board do in the past? Just collect check and sleep at the board meeting. KPMG needs to be tossed.
7 replies (most recent on top)
Just a note, GE makes very little profit from new unit sales. GE makes it's profit on replacing worn parts and uprates.
SEC will review 2016.
2017 Q1, Q2 and Q3 will also be reviewed, as there was a massive shift in expectations directly following the SEC request in June to review the accounting practices. and the Q4 publications as far as I understand it.
There are several articles in public domain explaining how GAAP works for Revenue Recognition, its just that GE didn't apply them til Q4.
Let us just wait and see what happens to the declared financials when the GAAP concepts are applied shall we?.
Please use the sharing tools found via the email icon at the top of articles. Copying articles to share with others is a breach of FT.com T&Cs and Copyright Policy. Email licensing@ft.com to buy additional rights. Subscribers may share up to 10 or 20 articles per month using the gift article service. More information can be found at https://www.ft.com/tour.
https://www.ft.com/content/6e2af3cc-a7b8-11db-b448-0000779e2340
The decision by the Securities Exchange Commission will reduce GE’s earnings by only a small amount between 2001 and 2006 but it is a setback for a company that prides itself on high standards of internal control.
Since the introduction of tighter rules on derivatives accounting in 2001, more than 200 US-listed companies have had to revise earnings.
However, the occurrence of two restatements in a short period at GE underlines the difficulties faced by multinationals in keeping pace with derivatives markets and their regulation.
I like how GE leadership has new metric “free cash flow “ to prioritize as opposed to CFOA.
Sorry, but if you have no Power sales how do you generate free cash flow? The place is like a house of mirrors. You can right size all you want to match business dynamics and climate but the bottom line is you still need to generate sales. If the market is extremely soft , the change in metrics is just another exercise to let share holders know your business is for crap. I also see these folks moving like snails. Cut the crap and make the cuts and stop the game playing.
I have looked up ASC 606, brief write up. It appears to dictate how revenue is recognized. I can tell you for our company it is a black box on how revenue was recognized prior to this new standard being imposed. I can only imagine how GE accounted for this in the past. I predict some reasonable restating of how their financials will look. Sorry but I do not see any positives from this mandatory accounting change. Some of the articles also hint to a negative of sales resources giving away freebies to close the deal that relate to this accounting change. I know GE sales frequently has to throw in items to sweeten the pot. One cannot expect this to help GE. Where are analysts asking these questions on the quarterly calls. Please stop throwing a slow ball strike over the plate and ask the darn hard questions please.
The books are cooked so often they're permanently smoking
Audit Analytics revealed that companies which restated financials due to errors in revenue recognition experience an "average" 6% preannouncement loss followed by continued declines.
So expect a negative impact on share price as the market punishes the obvious integrity issues.
Basically:
SEC is saying "We don't believe your figures"
GE reply "Our CEO/CFO has retired, thank you for allowing us the opportunity to correct their mistakes."
The Market says "Hey, did you lie to us?"
The Lawyers say "Class Action Lawsuits"
In the end everyone lives happily ever after, apart from those who don't.