Military
SEC Said to Question Boeing Accounting Method, Shares Dive 10%
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Shares of Boeing Co. (NYSE: BA) ran into a stiff headwind Thursday morning following a report from Bloomberg that the U.S. Securities and Exchange Commission (SEC) is investigating a whistleblower complaint regarding the way Boeing accounts for its new airplanes. Boeing uses a form of financial reporting known as program accounting that allows the company to defer the massive costs of developing and building new planes.
On its website, Boeing provides a comparison of its earnings from operations based on its program accounting reporting with a company-defined unit cost accounting method:
The basic difference between unit-cost based accounting and program accounting is that unit cost accounting determines cost of sales based on a more discrete costing of the individual airplane while program accounting determines cost of sales based on the average profitability over the airplane program accounting quantity. Unit cost accounting records cost of sales based on the cost of specific units delivered, and to the extent that inventoriable costs exceed estimated revenues, a loss is not recognized until delivery is made.
By the Boeing data, earnings from operations in 2015 under the program accounting method totaled $5.157 billion. Under the unit cost method, earnings from operation would have totaled $2.669 billion.
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