Re: US:Ford delays filing quarterly report with regulators
Ford files for SEC extension to fix accounting errors
BY SARAH A. WEBSTER
DETROIT FREE PRESS BUSINESS WRITER
Ford Motor Co. told the U.S. Securities and Exchange Commission on Thursday it would need a five-day extension to revise its earnings from 2001 until now, to correct accounting errors.
On Oct. 23, Ford said it lost $5.8 billion in the July-September period, bringing year-to-date losses to $7.2 billion.
However, the automaker said that was a preliminary result because it needed to restate its earnings for the last six years to fix an accounting error that has snagged many companies in recent years.
The deadline for filing that update was Thursday, but the automaker said it couldn't meet the deadline "without unreasonable effort or expense" and needed more time to make the complex adjustments.
"The analysis and preparation of our restated financial information is not yet complete," Ford said in a filing to notify the SEC of the delay.
Ford now says it will file its restatement on or before Nov. 14.
Several top analysts who have reviewed the accounting problem believed the error was technical in nature, relating to the way companies account for hedging activities, and not uncommon.
CFO Magazine reported in May that many companies have had a problem applying SFAS 133, which is an accounting rule issued by the Financial Accounting Standards Board, since they began complying with it six years ago.
Last year, the magazine reported, 57 companies restated their earnings because of faulty hedge accounting -- up from 27 in 2004.
"A lot of savvy companies were caught out on this," said Wesley Smyth, vice president and senior accounting analyst at Moody's Investors Service.
Hedges, in general, are investments designed to offset changing prices, such as fluctuations in currencies or commodities. In Ford's case, the company's credit arm enters into hedges to protect against fluctuations in the interest rate. How Ford has accounted for those hedges is the issue.
The value of the hedge changes with everyday market conditions, and the company's financial statements are supposed to reflect those ups and downs unless a company qualifies for a certain exemption.
They can do that if they can prove that their hedge is highly effective in offsetting the fluctuations, under the rules and guidance outlined in SFAS 133, which is about 1,000 pages long, Smyth said.
Many companies mistakenly thought they qualified for this exemption under a provision known as the "shortcut" method. Now they have to record changes in the value of their hedges in financial results.
"That increases the volatility," Smyth said.
Ford acknowledges now that it didn't qualify for the exemption, even though "these interest-rate swaps were and continue to be highly effective economic hedges."
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My next Ford.....