Trimas: Weakening Intangibles

From AAO Weblog

Trimas, the maker of engineered products, filed a nonreliance 8-K last Wednesday because it had previously overestimated the lives of unnamed customer relationship intangibles in all of its quarterly filings for the year 2006.

Damage caused: a $.02 nick out of earnings in each of the three quarters. That’s about all the information given in the 8-K: no reason why the lives of customer relationship intangibles needed to be shortened, no story about how the overly long lives were determined to be overly long. For the first three quarters of 2006, the company’s income from continuing operations dropped 12% from $.50 per diluted share to $.44 per share.

The refurbished 10-Q has a good deal more information, however. The “Explanatory Note” to the restated September 30 10-Q tells you that the restatement reflects a “reduction in estimated useful lives assigned to certain of our customer relationship intangibles as of January 1, 2006, in connection with our response to comments from the Staff of the Securities and Exchange Commission in the course of its review of our registration statement filed on Form S-1.” Later in footnote 2, the magnitude of that drop in useful lives for different classes of customer relationship intangibles is shown: from 40 years to 25 or 20 years, 25 years to 20 years, and 15 years to 12 years. No clues as to the nature of the intangibles, however.

In and of itself, it’s not too interesting, although you have to admit – those are some pretty big changes in lives! What kind of increased competition are they seeing in which segment, one wonders?) What makes it interesting is that the SEC seems to have provoked this particular change, and it makes you wonder if they’re starting to turn their focus to intangibles lives and valuation. Don’t forget that General Mills recently filed a non-reliance 8-K covering its last year’s financials because it found problems with its valuation method for testing intangibles values.

http://www.accountingobserver.com/blog/