One-time charge due to "accounting change"?

Question

I keep hearing businesses report earnings (or losses) with a disclaimer enumerating charges due to an accounting change. They claim that, technically, their net profit is better than it appears on the surface because of these one time (ostensibly artificial) "charges". I'm not an accountant, but this seems to defy logic; how can this always be a negative figure for companies that seem to do this every couple years?

Are companies not obligated to report an artificial gain from an accounting system change to the SEC, and if so, why does this never seem to be reported?

I'm not referring to writeoffs; I realize that companies play games with these all the time, holding or dumping them depending on their tax, dividend, and stock value situation

Answer 1

I understand how confusing that these things can be.

I am not sure that it is always a negative number but you may have seen many instances nonetheless.

Publicly trades companies are in fact required to report the effect of changes in accounting. This reporting would be accomplished by filing financial statements and the accompanying notes to those statements with the SEC. These financial statements that are filed with the SEC are required according to the rules set by the SEC.

You can go the the SEC site (www.sec.gov) and, if you know the name of the company that you are inquiring about, can take a look at the actual Form 10-K or Form 10-Q (10-K is yearly while 10-Q is quarterly). If you look through the notes to the financial statements you will find the explanation of the change of accounting.

However, since you are not an accountant this would probably be pretty boring. Being an accountant just take my word for it that you would be able to locate it there. I hope that this helps.

Answer 2

Get use to it accountants can make the numbers look anyway it needed to look.

most of the time if the stock price drops because of this a couple months later insiders get option at the lower price.

So what does it mean NOTHING