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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: tejek who wrote (171115)	12/13/2008 5:21:56 PM
From: Elroy Jetson	Read Replies (2) \| Respond to of 306849

General Motors said it has reached a preliminary agreement with FASB, the Financial Accounting Standards Board, that clears the way for the General Motors to be certified as the first debt-free auto maker. Even though General Motors is near bankruptcy, GM will still be able to claim it's debt-free by reclassifying it's current outstanding debt as "near-equity". Earning a debt-free certification would give the country's biggest automaker the holy grail in financial circles. "It's a huge milestone to be debt-free. It's bragging rights," said Rebecca Lindland, an analyst at Global Insight in Lexington, Mass. "To many people, GM is just about losing money by building cars few want. They never get credit for their financial engineering. Their Ditech subsidiary was the first to offer home owners 125% equity loans. If Toyota were handing out 125% equity loans, they would be having parades and waving flags." While FASB won't confirm how it gauges "near-equity" until the standard is finalized, Tony Posawatz, financial engineering director for the Volt, said the agency preliminarily agreed to a method that will produce a level of debt which is not material. Depending on assumptions used, GM may even consider making an offer to acquire JP Morgan Chase, said Michael Duoba, a research accountant at Argonne National Accounting Laboratory in Argonne, Ill., and chairman of the Society of Financial Engineers committee trying to develop new ways to simulate solvency. "It's a new process" The FASB "hopes to have a final policy soon," said spokeswoman Catherine Milbourn. Obtaining a debt-free status will require the FASB to develop a new way of measuring obligations for a company that's likely to rely more heavily on the kindness of stranger than actual profitability, GM's Posawatz. "It's a new process. No one has done accounting like this before," said Posawatz. "We would like to have 80 percent of the people believing this has stabilized GM, especially among our suppliers and lenders." .