NEW YORK, Jan 21 (Reuters) – Citigroup Inc. C.N on Tuesday became the first U.S. financial company to say it plans to report only income on a net basis, as U.S. companies have come under fire for giving misleading results that omit various charges.
“We are going to report our earnings going forward on strictly a GAAP basis so that everything will be included,” Citigroup Chief Executive Sanford “Sandy” Weill told analysts and reporters on a conference call about its earnings.
GAAP, or Generally Accepted Accounting Principles, are a widely accepted set of rules, conventions, standards and procedures for reporting financial information, as established by the Financial Accounting Standards Board.
Increasingly, U.S. companies have been reporting “pro forma” earnings, which strip out merger, restructuring and a host of other charges, in order to dress up their books. Regulators have been clamping down on this practice following a string of corporate accounting scandals that have shaken investors.
“I thought that was a very significant statement. I thought it was very positive also,” said Richard Bove, an analyst at Hoefer & Arnett, noting that Citigroup was the first financial firm to shift to only GAAP.
However, Bove also pointed out that Citigroup, the world's largest financial services company, was also redressing some of its own misleading practices.
“It's one of the companies that has spent most of the time over the past few years playing with its numbers and showing numbers in different fashions, and coming up with these business line reporting, then changing the categories every quarter so you never knew what was going on historically,” he said.
Citigroup has suffered massive losses from its dealings with once high-flying companies such as energy trader Enron Corp., which filed for bankruptcy after its fraudulent accounting practices were exposed.
New York-based Citigroup on Tuesday reported a 37 percent drop in fourth-quarter profit to $2.43 billion, after taking $1.55 billion in charges related to Wall Street's stock-research scandal and Enron.
Citigroup's stock fell 66 cents, or 1.8 percent, to close at $36.14 on the New York Stock Exchange.