Law Abiding Companies

#1
T-TownVol

T-TownVol

Keep America Great
Lab Rat
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Oct 22, 2007
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#1
Sen Waxman has called the companies, that "dare" abide by the law and disclosed the financial ramifications of the health care bill, to be grilled by congress. Once again, the share holders to which these companies owe this information, are the last ones that this administration thinks should have all the facts.
"America......what a country"!
 
#2
#2
Yea a real pickle because if they dont, then they would be in trouble with the SEC for overinflating their earnings.
 
#3
#3
These are private companies. Waxman has no basis for hauling them in.
If any one thinks that this administration/legislature is not looking to control as much as they can get away with controling, they are blind.
 
#4
#4
I was talking about DE, CAT and T. They all wrote down earnings

Congressman asks AT&T CEO Randall Stephenson to address concerns over health bill - Dallas Business Journal:

On Monday, it was announced U.S. Rep. Henry Waxman, D-Calif., sent a letter to AT&T and several other corporations asking them to verify that the bill’s passage will in fact cost additional expenses, including AT&T’s projected $1 billion charge.

Dallas-based telecommunications giant AT&T Inc. said Friday the company will record a $1 billion noncash charge in the first quarter of 2010 due to tax changes related to the passage of President Obama’s Patient Protection and Affordable Care Act.

AT&T (NYSE: T) said in a Securities and Exchange Commission filing that tax changes to the Medicare Part D subsidy in the passed bill prompted the company to make changes.

In the filing, AT&T added, “As a result of this legislation, including the additional tax burden, AT&T will be evaluating prospective changes to the active and retiree health care benefits offered by the company.”
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#5
#5
I knew who you were referring to and that is the rub here. They are following the law and are now going to be grilled for it.
The government can not have it both ways. Well, I guess THIS government can as long as they pit the classes against one another.
 
#6
#6
strange. i thought this bill would save american corporations money. these guys clearly are part of the republican conspiracy.
 
#9
#9
BigPapaVol said:
I'm with him in principal, but this seems to me to be political shenanigans, as I can't imagine the bill being retroactive to change the tax code for the 1Q10.
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the SEC requires by law that any major legistlative changes that would result in future losses to be reported and the liability in the future to be discounted to today. If they didn't report this the SEC would have had their arse in a sling.
 
#10
#10
droski said:
the SEC requires by law that any major legistlative changes that would result in future losses to be reported and the liability in the future to be discounted to today. If they didn't report this the SEC would have had their arse in a sling.
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But future losses are talking about contingent liabilities, not future operating costs. This future tax against earnings or operating cost doesn't fall under that type of liability. What he's doing is recognizing a liability for a quarter in which he won't be charged the additional expense.

The change will make future operations more expensive, but not the current. His recognition almost implies that he'll do nothing to address a $1B loss.
 
#11
#11
my understanding is they have to be reported as long as they are probable and easily estimated. I'm not sure why future taxes wouldn't be under that category as long as they reasonably assume the company will be profitable in the future. They have to report any tax liabilities in the future (not sure if they have to write it against earnings though).
 
#12
#12
droski said:
my understanding is they have to be reported as long as they are probable and easily estimated. I'm not sure why future taxes wouldn't be under that category as long as they reasonably assume the company will be profitable in the future. They have to report any tax liabilities in the future (not sure if they have to write it against earnings though).
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Then why don't they recognize future COGS the same way?

I understand the tax liabilities point, but that's from a historic change. They don't have to recognize future tax liabilities to operating income.
 
#13
#13
the press accounts I've read indicate that tax liabilities do have to be reported basically in one big chunk.
 
#14
#14
BigPapaVol said:
Then why don't they recognize future COGS the same way?
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i wouldn't think future COGS would be easily estimated for most companies. a lot of variable factors go into COGS. i'm no financial accountant, though i've taken many advanced financial accounting courses, but that is my understanding.
 
#15
#15
volinbham said:
the press accounts I've read indicate that tax liabilities do have to be reported basically in one big chunk.
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which types of tax liabilities? It makes no sense. I understand reporting a drag on earnings from a historical error or retroactive ruling, but this is again reporting an expense to operations. It's almost like having an increase in paper costs for their monthly billing mailings computed and listed as a future liability.
 
#16
#16
That big increase would largely be a noncash charge, stemming from adjustments to Caterpillar's tax liability. Accounting rules require that the long-term tax costs be included on the company's balance sheet at one time, even if the taxes paid annually on the subsidies are actually much less. Although the health-care legislation would be phased in over a number of years, the tax effects of the legislation would be felt in 2010 if the bill becomes law this year.

"From an accounting standpoint it hits right away," said Roland McDevitt, director of health care research for Towers Watson. The tax charges also would count against companies' earnings at a time when corporate profits remain fragile because of the weak economy.
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2nd UPDATE Caterpillar: Health Bill Would Cost Company $100M - WSJ.com
 
#17
#17
BigPapaVol said:
I understand the tax liabilities point, but that's from a historic change. They don't have to recognize future tax liabilities to operating income.
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that i don't know. they definetly have to report the liability on their balance sheet, but you are right i don't think they have to write it off ahead of time. they may have the option taking the loss now or over time though which at&t and others might find attractive to do so since earnings are already depressed..
 
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#18
#18
droski said:
i wouldn't think future COGS would be easily estimated for most companies. a lot of variable factors go into COGS. i'm no financial accountant, though i've taken many advanced financial accounting courses, but that is my understanding.
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but you get what I'm saying. This is a future operating cost for all companies. Investors need to understand it, but it's systemic. The crap that guys recognize early, and more importantly, expense early, is one time extraordinary stuff. Otherwise, they're going to have to come up with some sort of terminal value here and put a forever style multiple on their new expense. Seems to me he is only recognizing a short period.

I don't know what the new rule requires, but this sounds like politics to me. He can do it because it's non-cash and won't change how investors view his earnings generating capacity. He doesn't get disadvantaged at all here.
 
#19
#19
BigPapaVol said:
which types of tax liabilities? It makes no sense. I understand reporting a drag on earnings from a historical error or retroactive ruling, but this is again reporting an expense to operations. It's almost like having an increase in paper costs for their monthly billing mailings computed and listed as a future liability.
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This what they are projecting. It is the law that they report any issues that they see effecting earnings.
 
#21
#21
BigPapaVol said:
but you get what I'm saying. This is a future operating cost for all companies. Investors need to understand it, but it's systemic. The crap that guys recognize early, and more importantly, expense early, is one time extraordinary stuff. Otherwise, they're going to have to come up with some sort of terminal value here and put a forever style multiple on their new expense. Seems to me he is only recognizing a short period.

I don't know what the new rule requires, but this sounds like politics to me. He can do it because it's non-cash and won't change how investors view his earnings generating capacity. He doesn't get disadvantaged at all here.
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i'm not sure what part of the bill he's expensing here. i agree if it's a 100 year expense that it doesn't make much sense to take the charge.
 
#23
#23
droski said:
i'm not sure what part of the bill he's expensing here. i agree if it's a 100 year expense that it doesn't make much sense to take the charge.
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I guess it all comes down to the same point. It's a non-cash item that he's recognizing. I think he's making the point and could have put this off forever had he wanted.
 
#25
#25
BigPapaVol said:
I guess it all comes down to the same point. It's a non-cash item that he's recognizing. I think he's making the point and could have put this off forever had he wanted.
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ASC 740-10-35-4: "Deferred tax liabilities and assets shall be adjusted for the effect of a change in tax laws or rates. A change in tax laws or rates may also require a reevaluation of a valuation allowance for deferred tax assets."

ASC 740-10-45-15: "When deferred tax accounts are adjusted 740-10-35-4 for the effect of a change in tax laws or rates, the effect shall be included in income from continuing operations for the period that includes the enactment date."

FT Alphaville The healthcare party is over – now comes the (accounting) hangover
 
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