GE restates for accounting

[HenryTo]

Says the result of using hedge accounting is immaterial on an annual but material on a quarterly basis. Market is treating GE well here but a lot of this sounds fishy to me. Maybe I'm just an inherently skeptical person.

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GE restates for accounting, confirms forecast
Quarterly estimate raised after hedge rule scrutinized
By Padraic Cassidy, MarketWatch
Last Update: 8:00 AM ET May 6, 2005

NEW YORK (MarketWatch) - General Electric Co. said Friday that it would restate income for 2001 through 2004 after a review by its auditors found the conglomerate's hedge accounting was incorrect, a change that will raise earnings by $381 million through the first quarter of 2005.

"Looking back, the result of not using hedge accounting is immaterial on an annual basis. However, on a quarterly basis the impacts would be material and we decided to restate results," said Chief Executive Jeff Immelt.

GE reaffirmed its 2005 outlook for $1.78 to $1.83 a share, though a noncash charge for not using hedge accounting reduced first-quarter 2005 earnings by $78 million, to 37 cents a share from 38 cents a share

The Fairfield, Conn., company raised its second-quarter earnings outlook to between 43 cents and 45 cents a share, from 42 cents to 44 cents a share.

The company said it made the change to accounting after a quarterly audit review with KPMG discovered that transactions "used to protect its financial-services businesses from changes in interest and currency exchange rates do not technically comply" with a rule for accounting for derivatives and hedges.

GE said it would amend its 2004 Form 10K for the years 2002 through 2004, and certain financial information for the year 2001 and each quarter in 2003 and 2004.

GE also said Friday that its insurance solutions division will sell its physician and dentist liability insurance unit, Medical Protective Corp., to Berkshire Hathaway Inc. (BRKA: news, chart, profile) unit National Indemnity. Terms weren't disclosed. The sale is expected to close by June 30.

GE's stock, (GE: news, chart, profile) a component of the Dow Industrial Average, closed down 35 cents at $35.85 on Thursday.