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Politics : Formerly About Advanced Micro Devices
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To: tejek who wrote (148268)7/15/2002 9:07:43 AM
From: i-node  Read Replies (2) of 1575748
 
At issue is how Halliburton accounts for cost overruns and changes on its billion-dollar contracts to build such projects as offshore drilling platforms or liquid natural-gas plants. Until 1998, the company wouldn't report revenue from such claims until the customer agreed to pay--which could take years. But since 1998, Halliburton has estimated how much of the disputed costs it expects to collect and booked the not-yet-received payment immediately. For 1998, Halliburton booked $89 million in pretax revenue as unpaid claims. Similar claims added $43 million to revenue in 1999 and $102 million in 2001; there was no impact in 2000.

Based on the information reported above, there are two basic accounting principles in conflict -- one which calls for conservative treatment versus one which calls for matching expenses with the revenue it generates. One does not trump the other.

This is certainly not on the level of an Enron or Worldcom. A powerful argument can be made that it is totally appropriate to use either method. I think an important aspect of it will be disclosure. If there is no disclosure in the footnotes to the statements, a mistake was made -- but the auditors should have insisted on it, and normally would. This would not, under any circumstances, rise to the level of "fraud" or "defalcation".

I had been concerned that there really might be something to this story, the way the media is going after it. But after reading the above paragraph, which seems to present the issues clearly, it really doesn't look like anything major.

Thanks for posting these facts. I had done a little reading and hadn't found anything other than innuendo.
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