General Motors will restate its financial statements after 2001, primarily due to pre-2002 tax accounting adjustments. The auto giant will also delay filing its results for 2006 as well as for the fourth quarter. GM said its deferred tax liabilities were overstated because of accounting errors that originally occurred primarily before 2002.
While these errors do not have an impact on cash flow or previously reported cash balances, retained earnings as of year-end 2001 and subsequent periods were understated by between $450 million and $600 million as a result, according to a company announcement.
Last March GM restated its financials for the five years ended 2004 due to an accounting issue at ResCap, a residential mortgage unit and subsidiary of General Motors Acceptance Corp. For certain mortgage-loan transactions, GM explained, ResCap incorrectly classified cash flows from investing activities as cash flows from operations. GM also delayed filing its annual report last year because it was investigating these accounting issues.
In its announcement released Thursday evening, GM also said it is assessing various other miscellaneous adjustments for 2002 through 2006. But it assured these adjustments will not be material on a consolidated basis.
GM CFO Fritz Henderson told the Associated Press the delayed earnings reports should not hurt the company’s credibility with investors. “We just have a lot of things going on,” he told the wire service.
GM plans to provide further information on the progress of its financial reporting during the week of February 5, and the company expects to file its annual report by its due date of March 1. In addition, GM announced it expects to be profitable on a reported consolidated basis in the 2006 fourth quarter. Its net income is expected to significantly improve over the fourth quarter of 2005.