GM's Monday Earnings Report: Mind The GAAP

Edward Niedermeyer
by Edward Niedermeyer

Were you looking forward to GM’s first post-bankruptcy financial report, set to be released on Monday? We sure were. Right up until we read that the earning statement won’t be compliant with a little something called Generally Accepted Accounting Principles. Automotive News [sub] reports that GM will use so-called “managerial accounting,” (do we have an accountant in the house?) until Q1 2010 results are filed using SEC-approved “fresh start accounting.” The SEC is apparently aware that GM is still transitioning to the post-bankruptcy accounting system, and has reportedly approved GM’s timetable for compliance. Meanwhile, GM’s 3rd quarter results will be announced in two parts, for the period it was in bankruptcy (June 1- June 9) and after (June 10- September 30). GM’s spokesperson is kind enough to explain:

In some cases, it’s not comparable to do a year-to-year comparison. Anything with a cost component to it, won’t be comparable. For sales and revenue, it will be comparable. It’s going to be kind of complicated this time around. There’s no way around that. It’s not a standard situation.

Don’t you just hate it when that happens? You try and you try to be transparent, and then your financial results come out all unintelligible because it takes the better part of a year to switch accounting systems. No wonder Whitacre is downplaying talk of a Summer 2010 IPO.

Edward Niedermeyer
Edward Niedermeyer

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5 of 8 comments
  • PeteMoran PeteMoran on Nov 12, 2009

    By way of otherwise irrelevant trivia, the SEC approved Enron's mark-to-market accounting request. They may have missed a fraudster called Madoff too.

  • Lorenzo Lorenzo on Nov 12, 2009

    Come on guys, be reasonable. Wasn't GM's CFO one Mr. Wagoner before becoming Chairman? Weren't GM's books so bad that a GM auditor left under a cloud when the SEC reviewed the books? Didn't the replacement CFO, Mr. Henderson get elevated to CEO before he could paper over, er... clean up the books? Didn't a PTFOA guy express surprise at the accounting mess GM had on its hands? Given all that, it's totally understandable that it's taking so long to track down at the source the creative math that was applied for years. When they say "our books have been messed up so bad and for so long that we need more time to clean them up", they're obviously telling the truth. It doesn't get more transparent than that.

    • Guyincognito Guyincognito on Nov 13, 2009

      Its the "we need more time to clean them up" part that I'm finding hard to believe. If they said, 'we need more time to come up with new, harder to detect, creative accounting methods to cover up our growing insolvency', I would find that more truthful.

  • Ton12 (of GM) Ton12 (of GM) on Nov 13, 2009

    From what I remember in my business classes: GAAP accounting or financial accounting - reporting system used for tax purposes and public reporting Managerial accounting - the real accounting all businesses use to actually operate a company Don't under estimate this. The clarity we might get from this report may tell us more about the strength of the company than GAAP.

  • MkII MkII on Nov 14, 2009

    Yes you can compare those statements - there is just a series of reconciliations to derive those numbers on same basis. Large companies like top 20 banks and fortune 50 companies do that, GM obviously... not. For once, don't hate the game, hate the player.