General Motors announced its third quarter earnings today and surprised Wall Street by revealing a $38.6 billion charge on the books that represents a change in tax accounting required by the Financial Accounting Standards Board's Statement of Financial Accounting Standards. That huge number represents tax credits the automaker can't account for until it actually earns the taxable income to which it applies.
Even without considering the tax adjustment of $38.6 billion and other special items like the $3.5 billion sale of Allison Transmission, GM still lost around $1.6 billion last quarter, compared to the $497 million profit it earned for the same quarter last year.

Despite the red ink on paper, GM's auto business actually performed well in the third quarter. It recorded a profit of $122 million compared with a loss of $577 million in Q3 2006. Global sales reached 2.39 million vehicles, up 4 percent from last year and a record for the company.

Nevertheless, the tax accounting adjustment that led to a total loss of around $39 billion stands as the largest quarterly loss ever for GM, surpassing the $21 billion hit the company took in 1992. As such, the announcement of GM's earnings today have been driving down the Dow Jones Industrial Average. At 11:48 AM EST, the Dow is down 143.80 points.

[Source: The Detroit News, BloggingStocks]

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