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Pastimes : The Justa & Lars Honors Bob Brinker Investment Club
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To: Investor2 who wrote (10081)11/24/1999 2:25:00 PM
From: Boca_PETE   of 15132
 
I2: re: < IBM and disclosures of special one-time items >

I don't follow IBM's press releases and annual report disclosures, but I do follow major oil industry companies.

The whole practice of disclosing special one-time items has developed out of demands from the analyst community, not from mandated FASB and SEC disclosure rules.

In analyzing press releases each quarter, I've noticed that companies vary in their interpretation of just what special items are. MOBIL treats normal recurring LIFO inventory adjustments as "special items" whereas all the other majors don't. PHILLIPS had treated currency exchange effects as a "special item" whereas the rest of the majors don't. EXXON is so large and must have many of the types of special items the other majors od, but they rarely disclose special items (maybe they decide such items are "immaterial" and should not be disclosed).

Then there's period-to-period inconsistencies by some companies in identifying special items. During 1999 fourth quarter, CHEVRON treated a major CALTEX inventory write-down to market value as a special item (as did all the other major oil companies). However during 1999 first quarter when prices rose and most oil majors recorded special credits to reverse such 1998 fourth quarter write-downs, CHEVRON did not.

In other words, this area of special item disclosure is up to company management interpretation. Some companies are more cooperative than others and seek to satisfy analyst needs in this area - others are less forthcoming. I'd imagine this situation is not confined to the oil industry.

FASB and SEC rules do mandate disclosure of certain one-time items as "Extraordinary Items" such as "Losses on discontinued operations" and "cummulative effects from changes in accounting principles".

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