Citigroup First to Report Only GAAP Earnings

Yahoo! News ^ | 01/21/2003 | Reuters

[E. Pluribus Unum]

NEW YORK (Reuters) - Citigroup Inc. (NYSE:C - news) on Tuesday became the first U.S. financial company to say it plans to report only income on a net basis, as U.S. companies have come under fire for giving misleading results that omit various charges.

"We are going to report our earnings going forward on strictly a GAAP basis so that everything will be included," Citigroup Chief Executive Sanford "Sandy" Weill told analysts and reporters on a conference call about its earnings.

GAAP, or Generally Accepted Accounting Principles, are a widely accepted set of rules, conventions, standards and procedures for reporting financial information, as established by the Financial Accounting Standards Board.

Increasingly, U.S. companies have been reporting "pro forma" earnings, which strip out merger, restructuring and a host of other charges, in order to dress up their books. Regulators have been clamping down on this practice following a string of corporate accounting scandals that have shaken investors.

"I thought that was a very significant statement. I thought it was very positive also," said Richard Bove, an analyst at Hoefer & Arnett, noting that Citigroup was the first financial firm to shift to only GAAP.

However, Bove also pointed out that Citigroup, the world's largest financial services company, was also redressing some of its own misleading practices.

"It's one of the companies that has spent most of the time over the past few years playing with its numbers and showing numbers in different fashions, and coming up with these business line reporting, then changing the categories every quarter so you never knew what was going on historically," he said.

Citigroup has suffered massive losses from its dealings with once high-flying companies such as energy trader Enron Corp. (Other OTC:ENRNQ - news), which filed for bankruptcy after its fraudulent accounting practices were exposed.

New York-based Citigroup on Tuesday reported a 37 percent drop in fourth-quarter profit to $2.43 billion, after taking $1.55 billion in charges related to Wall Street's stock-research scandal and Enron.

Citigroup's stock fell 66 cents, or 1.8 percent, to close at $36.14 on the New York Stock Exchange (news - web sites).

[E. Pluribus Unum]

As the proud owner of a CPA certificate, I think it is criminal that any major (or minor) accounting firm would report the results of any publicly-held company using anything other than generally-accepted accounting principles.

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[Poohbah]

I concur...how much money's in the gazinta box - money needed to go to the gazouta box = profit.

[Snerfling]

For all the finance types at FR, both Sarbanes-Oxley and PCAOB have all the current info on the Act. BTW, the SEC is meeting tomorrow to vote on the final rules regarding auditor independence and attorney conduct. These are the biggies everyone has been waiting for.

[truth_seeker]

"As the proud owner of a CPA certificate, I think it is criminal that any major (or minor) accounting firm would report the results of any publicly-held company using anything other than generally-accepted accounting principles."

I concur that it is/was wrong for companies to use alternative reporting bases.

But while it is nothing personal against you, I wouldn't be too proud of CPAs.

This has all occurred, because the "profession" prostituted itseld, to its clients. And in so doing, opened a big door, for government regulation. The government can say, "see...you guys showed that self-regulation doesn't work."

Things like SPEs and QSPEs were merely loopholes, PUT INTO the FASBs, to effectively make them PART of GAAP.

Convince me that the example I cite is anything, but a way to deceive certain constituents (creditors, customers, investors)?

Companies want vehicles for deception and special treatment. CPAs help them get implemented, and get into GAAP.

My 2 cents.

[MonroeDNA]

Now let's push the US governemtn to adopt the same rules.

BTW, congrats on you CPA. The 4-part CPA tests makes the bar exams look like kindergarten.

[MonroeDNA]

Got 3 CPA's as siblings, including a professor.

Everyone of them and the crowd they all hang with are well above-board folks. Absolutely incorruptable, though they hate the IRS, as a rule.

Good people to know, for sure.

[E. Pluribus Unum]

But while it is nothing personal against you, I wouldn't be too proud of CPAs.

I said I got a CPA certificate, meaning I passed the tests. I never said I ever used it. I got it because all I had to do after getting my chemistry degree was take a few accounting courses and pass the exam. The reason I took it was because somebody told me once that a CPA certificate was an MBA-equivalent.

They lied.

[BIGZ]

After years of crap accounting, out of control during the Clinton years, we now will have a firm base in which to invest.

Every cloud has a Silver lining.

[truth_seeker]

"The reason I took it was because somebody told me once that a CPA certificate was an MBA-equivalent."

I recall that to become a "CPA" required passing a test, plus two years employment working on audits, etc. (practical experience)

A CPA is quite specialized, whereas the MBA curriculum is more broad. While I posses neither, I used to supervize many of them both (practical experience, mine).

The thing which has CHANGED over recent decades is the loss of business ETHICS. They have made it a university course subject, in business administration.

During my university years (late 60s - early 70s) it was a presumed aspect, of any professional field. Clinton was not the cause; he was a reflection of this fact.

Milken, Keating, Boesky and others preceeded the recent rash of ethical shortcomings.

Once again, I'm not critical of any one individual, but CPAs, MBAs, Attorneys--ethics have been on the wane, for years. You cannot legislate morality.

I do stand by the contention that the big CPA firms have sold their professional souls, collectively, in pursuit of eight figure engagements, etc.

What I saw in my industry was at the time ethical (tax avoidance and deferral). But the framework for "legal corruption" was obvious.

Falsifying profits is one thing, and some of the incidents of late are just that. That was against GAAP, all along.

Perhaps more troublesome are the practices, established in FASBs as OK, which deceive investors, creditors, employees and customers. Those would include capitalizing expense items, and reporting profits for off-balance sheet entities.

[E. Pluribus Unum]

I recall that to become a "CPA" required passing a test, plus two years employment working on audits, etc.

Again, I said I was the proud owner of a CPA certificate, I never said I was a CPA. I passed the tests. I have the certificate. I never took the pay cut to join an accounting firm at an entry level.