GE used aggressive accounting to misreport earnings: SEC
05 Aug 2009
General Electric has been accused by the Securities and Exchange Commission (SEC) of using improper accounting methods to increase its reported earnings or revenues according to a press release.
GE has agreed to pay a $50-million penalty without admitting or denying the accusations to settle the SEC's civil suit, according to reports.
According to the SEC, GE used aggressive accounting methods and bent rules beyond breaking point. GE misapplied the accounting rules to present its financial results in better light, the commission said. The commission added that GE's accounting policies for accounting for hedging commercial paper amounted to intentional violation of anti-fraud provisions.
Two other irregularities that the commission found objectionable were GE's methods of accounting for swap derivatives and recording of profit on sales of spare parts for jet engines. The SEC found these as negligent but unintentional violations.
GE has previously made amends for these in SEC filings made between May 2005 and February 2008. Under the terms of the settlement, the company agreed to pay a civil penalty of $50 million and to comply with the federal securities laws.
The company in a statement on the settlement said that it was committed to the highest standards of accounting. It added that the GE cooperated with the SEC over the course of its investigation and GE and its audit committee conducted their own comprehensive review in conjunction with the investigation.
