In the great restatement wave of 2005, much attention focused on problems in lease accounting. Now experts say hedge accounting errors deserve at least some blame for the volume of restatements—and more are likely on the way.
At least 40 companies with market capitalizations above $100 million restated financial results in 2005 to correct hedge accounting errors, according to research and advisory firm Glass Lewis & Co. Some were giants like General Electric and American International Group, whose restatements showed earnings increases of $538 million and $500 million, respectively. But a much larger number were small companies, many of them in the financial sector. What’s more, they were fairly evenly split in reporting either an increase or a decrease in their earnings.
