Banking & Capital Markets

JPMorgan Restates Cash-Flow Statements

Although its total cash remains unchanged, the banking giant is the latest to be tripped up by the difference between investing activities and oper...
Stephen TaubAugust 4, 2006

JPMorgan Chase & Co. announced it has restated its cash-flow statements for 2003 through 2005 and for the first quarter of 2006 because it misclassified cash flows related to certain residential mortgages and other loans that had been originated or purchased with the intent to sell.

The banking giant said the cash flows from these loans had been classified as investing activities. However, they should have been classified as operating activities, in accordance with Statement of Financial Accounting Standards No. 102 (Statement of Cash Flows — Exemption of Certain Enterprises and Classification of Cash Flows from Certain Securities Acquired for Resale).

JPMorgan added that the restatements will affect only the classification of these activities and the subtotals of cash flows from operating and investing activities in the affected cash-flow statements. The revisions also will have no impact on total cash.

According to marketwatch.com, the bank decided to make the revisions after the Securities and Exchange Commission questioned the way it had been classifying cash flows from mortgages and loans, citing Julia Bates, a company investor-relations spokeswoman.

Bates told the Website that the commission questioned the bank about the practice following a “routine review” of its financial statements.