GE’s STRUGGLES CONTINUE. More Bad News. GE’s accounting has long been a subject of scrutiny – By Todd Horwitz, Bubba Trading

 

GE’s STRUGGLES CONTINUE

More Bad News

General Electric Co. said securities regulators have opened a probe into the company’s accounting practices, a new challenge to the conglomerate’s efforts to untangle its problems and turn around its struggling business. The Securities and Exchange Commission is investigating how the company recognized revenue from long-term service contracts for projects like power-plant repairs and jet-engine maintenance, GE said. The Boston-based giant, which reported revenue of $122 billion for 2017, has about $15 billion of such service contracts on its books.

The SEC first inquired about the contract accounting in late November after the company sharply revised its financial projections, according to a person familiar with the matter. Last week, the agency sought additional information about GE’s review of its insurance business after the company disclosed a massive charge, this person said.

GE’s accounting has long been a subject of scrutiny. The company regularly beat Wall Street’s estimates under former CEO Jack Welch. The precision with which it did so, though, led critics to question the results. In 2009, GE paid $50 million to settle SEC allegations that it had used improper accounting methods to boost earnings and revenues in 2002 and 2003. The company didn’t admit or deny the SEC’s allegations in agreeing to the settlement.

Under former CEO Jeff Immelt, the company wound down much of its lending business in the wake of the financial crisis and made big acquisitions to expand its power and oil businesses. But the industrial units struggled in recent years to generate enough cash to pay the company’s dividend, prompting the company’s move in November to cut the investor payout by half.
There will be a GE in the future, but it will look different than it does today,” Mr. Flannery said Wednesday. “We have a long way to go but the mission is clear.”

Keep those stops tight
Todd “Bubba” Horwitz

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Todd Horwitz - Author of “Average Joe Options“. Todd began his trading career in 1980 at the CBOE. He was one of the original traders in the OEX & helped start the SPX. He is a member the CME where he trades S&P futures as well as foreign currencies & is a regular contributor to CNBC, Bloomberg, BNN, Fox & many other major news networks.