GE Must Restate Earnings Again: FT
General Electric has been forced to restate earnings for the second time in 18 months after US regulators objected to the way the conglomerate had accounted for complex derivatives instruments the Financial Times reports.
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.
"We are disappointed ... We are committed to getting this accounting issue right," said Keith Sherin, GE's senior vice president and chief financial office. "The SEC told us to fix it and we are fixing it."
He argued that the restatement was due to a "technical" difference of views with regulators, adding that the method used to account for billions of dollars in interest rate swaps at GE's finance arm had been approved by auditors KPMG.
This comes off a two-week period in which GE announced $15 billion in takeovers. But the deals actually came a bit closer together than they would have liked. "It's just serendipity that it all came together this quickly," Sherin, said. "It was not something that we intended to do or that we ideally would like to do. We like to spread these deals out more."
The Fairfield, Connecticut-based company reached deals to buy parts of Abbott Laboratories, the aerospace business of Britain's Smiths Group and oil and gas field equipment maker Vetco Gray. It then said on Friday that it may sell its troubled GE Plastics business, where profit fell 49% in the fourth quarter.
GE said it had been pursuing some of these deals for years and expects to close them in the first half of 2007, with the plastics sale expected to wrap up by the end of the year.
