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Politics : Formerly About Advanced Micro Devices -- Ignore unavailable to you. Want to Upgrade?

To: i-node who wrote (438661)	12/6/2008 9:43:42 AM
From: Alighieri	Read Replies (1) \| Respond to of 1574267

Normally, such costs are accrued as of the end of each accounting period so that you don't have "legacy" costs. However, when a new deal is struck with UAW which requires them to pay additional benefits for employees who are no longer producing vehicles, the costs are required to flow through as cost of sales, they become part of current inventoriable cost, and are expensed as the inventory is liquidated. Chances are that these are payments that the company has to make to the pension and benefit funds to cover additional workers who join the retired pool. I doubt that they have added or accrued any new benefits negotiated by UAW...but I am not sure. it is usually G&A but could conceivably be reported elsewhere in a business this size. G&A is a period expense, below the GM line and a direct hit to PTI. Where else they could report it? Al

To: i-node who wrote (438661)	12/6/2008 5:05:56 PM
From: tejek	Read Replies (1) \| Respond to of 1574267

Internally, they can cost inventory any way they want to -- that is, for manufacturing cost accounting. But for financial reporting purposes, legacy costs must flow through just as other direct labor costs do. I don't know where you got the "rent on a building" thing; this is not direct labor cost or for that matter, labor cost at all -- it is usually G&A but could conceivably be reported elsewhere in a business this size. And legacy costs are not direct labor costs either. How you treat things when putting the company's finacial sheets together is purely an accounting practice. I mean what's 'Goodwill'? Can you touch it...can you eat it? Of course not. Its an accounting term made up to cover what is an intangible. Would we compare GM's goodwill to TM's we would find it lacking. Toyota has a much better rep in this country and probably in the world. Do we deny GM a loan because its goodwill is not as good? You might try but I suspect you won't get very far. Now GM has much worse legacy costs than TM.........at least here in the US. That's because it has many more years of retired employees. Its a problem that has to be offset in some way because it puts GM at a cost disadvantage when selling its cars. Just like with goodwill, you don't turn down help to GM because it has higher legacy costs but you find a way around the problem. You find a solution that neutralizes that cost. It will take the cooperation of mgmt and the union to make it happen.