http://www.autoblog.com/2007/11/08/gms-39-billion-loss-further-explained/ Autoblog Comments for http://www.autoblog.com/media/feedlogo.gif http://www.autoblog.com en-us Copyright 2008 Weblogs, Inc. The contents of this feed are available for non-commercial use only. Blogsmith http://www.blogsmith.com/http://www.autoblog.com/2007/11/08/gms-39-billion-loss-further-explained/http://www.autoblog.com/2007/11/08/gms-39-billion-loss-further-explained/Nov 8th 2007 12:19PMhttp://www.autoblog.com/2007/11/08/gms-39-billion-loss-further-explained/http://www.autoblog.com/2007/11/08/gms-39-billion-loss-further-explained/
I think my analogy for this would be this: You got a $10 discount coupon on your receipt while checking out at Wal-Mart. You were telling people that you were now $10 richer. Then comes the IRS and says, well technically you can't really count that when you are calculating your net worth unlike other items like your car and your house. So then you had to go and tell the world, "That you aren't including that $10 in your net worth calculation".

That is probably a horrible analogy, so feel free to rip it to bits and come up with your own! :-)]]>Nov 8th 2007 12:53PMhttp://www.autoblog.com/2007/11/08/gms-39-billion-loss-further-explained/http://www.autoblog.com/2007/11/08/gms-39-billion-loss-further-explained/Nov 8th 2007 12:42PMhttp://www.autoblog.com/2007/11/08/gms-39-billion-loss-further-explained/http://www.autoblog.com/2007/11/08/gms-39-billion-loss-further-explained/Nov 8th 2007 6:23PMhttp://www.autoblog.com/2007/11/08/gms-39-billion-loss-further-explained/http://www.autoblog.com/2007/11/08/gms-39-billion-loss-further-explained/Nov 8th 2007 12:43PMhttp://www.autoblog.com/2007/11/08/gms-39-billion-loss-further-explained/http://www.autoblog.com/2007/11/08/gms-39-billion-loss-further-explained/
All financial reporting includes a mix of cash and non-cash items and you can not attach yourself to the bottom line without looking at the financial reporting as a whole. ]]>Nov 8th 2007 1:46PMhttp://www.autoblog.com/2007/11/08/gms-39-billion-loss-further-explained/http://www.autoblog.com/2007/11/08/gms-39-billion-loss-further-explained/
This does make sense in general, in that it would allow a company which was suffering financially to get back on its feet as it first returns to profitability. Someone please correct me if I'm misunderstanding things.]]>Nov 8th 2007 2:39PMhttp://www.autoblog.com/2007/11/08/gms-39-billion-loss-further-explained/http://www.autoblog.com/2007/11/08/gms-39-billion-loss-further-explained/
This does make sense in general, in that it would allow a company which was suffering financially to get back on its feet as it first returns to profitability. Someone please correct me if I'm misunderstanding things.]]>Nov 8th 2007 2:40PMhttp://www.autoblog.com/2007/11/08/gms-39-billion-loss-further-explained/http://www.autoblog.com/2007/11/08/gms-39-billion-loss-further-explained/
or was the original plan to report a less drastic loss and then carry it over coming quarters to keep profits-taxes down, but due to the Financial Accounting Standards Board's new rules they have to report it all right now?

can they now carry forward this loss onto later quarters to keep their taxes low?

JC]]>Nov 8th 2007 2:45PMhttp://www.autoblog.com/2007/11/08/gms-39-billion-loss-further-explained/http://www.autoblog.com/2007/11/08/gms-39-billion-loss-further-explained/Nov 8th 2007 3:04PMhttp://www.autoblog.com/2007/11/08/gms-39-billion-loss-further-explained/http://www.autoblog.com/2007/11/08/gms-39-billion-loss-further-explained/Nov 8th 2007 3:00PMhttp://www.autoblog.com/2007/11/08/gms-39-billion-loss-further-explained/http://www.autoblog.com/2007/11/08/gms-39-billion-loss-further-explained/
More proof that you have to take most "information" with a grain of salt.]]>Nov 8th 2007 3:12PMhttp://www.autoblog.com/2007/11/08/gms-39-billion-loss-further-explained/http://www.autoblog.com/2007/11/08/gms-39-billion-loss-further-explained/Nov 8th 2007 3:22PMhttp://www.autoblog.com/2007/11/08/gms-39-billion-loss-further-explained/http://www.autoblog.com/2007/11/08/gms-39-billion-loss-further-explained/Nov 8th 2007 3:29PMhttp://www.autoblog.com/2007/11/08/gms-39-billion-loss-further-explained/http://www.autoblog.com/2007/11/08/gms-39-billion-loss-further-explained/Nov 8th 2007 5:25PMhttp://www.autoblog.com/2007/11/08/gms-39-billion-loss-further-explained/http://www.autoblog.com/2007/11/08/gms-39-billion-loss-further-explained/Nov 8th 2007 4:34PMhttp://www.autoblog.com/2007/11/08/gms-39-billion-loss-further-explained/http://www.autoblog.com/2007/11/08/gms-39-billion-loss-further-explained/Nov 8th 2007 4:58PMhttp://www.autoblog.com/2007/11/08/gms-39-billion-loss-further-explained/http://www.autoblog.com/2007/11/08/gms-39-billion-loss-further-explained/
1) NOT New Accounting - This is not new accounting. The charge was taken under FAS 109 - Accounting for Income Taxes. This is not a new FASB statement. "The charge" is due to a change in estimate on future taxable income in 3 foreign jurisdictions (eg. previously, the Company thought they would be profitable in these jurisidictions for tax purposes; now they are forecasting continued losses through the expiration of the NOL carryforwards).

2) What's the accounting model? In prior years, the Company was in a NOL (net operating loss for its taxable income calculation) position. For financial reporting (book) purposes, the Company assessed the future realizability of these NOLs (tax laws allow you to carryforward NOLs into the future to reduce future taxable income). For the NOL to be realizable, you must estimate you will have future taxable income before the carryforward expires. PREVIOUSLY, the Company forecasted taxable income in these jurisdictions. At such time, they recorded Dr. Deferred Tax Asset (balance sheet), Cr. Income Tax Expense (IS reduction of expense). In Q3, the Company is no longer forecasting sufficient taxable income to realize these NOLs. As these assets will now never result in cash to the Company, they essentially wrote off the assets (Dr. Income Tax Expense, Cr. DTA Valuation Allowance).

3) So what's the real impact on the Company from a financial prospective -- Answer - it depends on what the market's expectation was. Yes, its a "non-cash" charge today but previously, they expected a cash benefit (through the reduction of taxes payable to the jurisdictions) in the future. Now, they don't expect to get this cash benefit due to unforeseen declines in taxable income in these jurisdictions. It doesn't directly cost them cash as they expect continued losses in these jurisdictions, however, they previously expected taxable income (which usually equates to cash inflows) which they are not longer expected.]]>Nov 8th 2007 7:24PMhttp://www.autoblog.com/2007/11/08/gms-39-billion-loss-further-explained/http://www.autoblog.com/2007/11/08/gms-39-billion-loss-further-explained/
Look at the balance sheet...

http://media.corporate-ir.net/media_files/IROL/84/84530/earnings/Q307_Financial_Highlights.pdf

Assets: $149 billion
Liabilites: $190 billion

That's right, if you sold everything GM owned, you would still $50 billion dollars more to pay down what they owe.

]]>Nov 8th 2007 9:36PM