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11/10/05

GM restates earnings - film at 11

Now this is just plain ridiculous;

DETROIT, Nov. 9 - General Motors said on Wednesday that it overstated its 2001 results by as much as $400 million, or 35 percent, and said that it might have to restate results for the following years as well. The company said a review of its supplier payments for the years 2000 through 2005 concluded that it erroneously credited some payments to its results for 2001, instead of recording the payments for later years.

Don't you have an accountant? How do you make a $400 million dollar mistake in accounting? Elementary school children can count. This is not a mistake. This is manipulation of stock prices and assets used to secure loans.

In a filing with the Securities and Exchange Commission, G.M. said that it would revise its 2001 results and that it estimated it had overstated results by $300 million to $400 million, 25 percent to 35 percent of its net income for the year. But the company said it had not determined a final number. G.M. earned $1.2 billion in 2001, after accounting for the sale of Hughes Electronics, which doubled its net income.

A 25% to 35% MISTAKE? Let's break that down into terms we can understand. If I go to McDonalds and order something from the dollar menu, with tax it comes to $1.07. I give them $2.00. They give me back 58 cents. I KNOW I'M SHORT 35 CENTS! It doesn't take a rocket scientist. Think about it. If with all their billions to account for they overlooked $1000, okay. They overlook $100,000 and there is a problem here! A 300-400 million dollar "mistake" cannot happen unless it is meant to happen.

Without the Hughes sale, G.M. earned $601 million, meaning that the restatement could be more than half those results if the figure comes in at the high end of G.M.'s estimate.

More than half! Thats like saying I worked 40 hours this week at $10 per hour and got a check for only $200 and not noticing the mistake for 4 years!

G.M. said it might restate results for some other years, which had been affected by "erroneous accounting." It did not expect those changes to have a material effect.

More than half! Thats not something that will have a "material effect"? "Erroneous accounting" is way too light a term for anyone that can make a 300-400 million dollar mistake. Thats the equivalent of Bush's "Faulty Intelligence" that Iraq had WMD.

Because of the review, the audit committee of G.M.'s board said in a statement that "investors should no longer rely on G.M.'s previously filed financial statements for that year, nor the related auditors' reports." G.M. said that a review of its supplier payments was still under way and that it expected to complete its investigation by the time it filed its 2005 annual report.

That is the understatement of the year. Investors should no longer rely on GM is the only part that makes any sense. These corporations keep having "accounting errors" that cost investors millions. CLUE: If you own a corporation that hires an accounting firm that makes these kinds of mistakes, get a new one. CLUE 2: If you own an accounting firm and your company makes these kind of mistakes, go into some other business. CLUE 3: If you run the SEC and you hear an accounting firm makes this kind of mistakle you should close them doen. Have them sell off thier assets to pay back investors. Make them promise to never count money again.


By Chris McElroy
More things that just piss me off

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