GATX: Another Favorable 108 Correction

From AAO Weblog

GATX Corporation, the financial and leasing outfit, made a SAB 108 “cumulative adjustment” type of correction to its beginning 2006 retained earnings, noted in its 10-K filing.

This one (like the Deltic Timber adjustment noted yesterday) has a favorable flavor to it: the correction, after applying both rollover and iron curtain evaluation, increased the beginning balance of retained earnings by almost 3%.

Reason? Before 2002, the company had sold multiple segments which it had reported as discontinued operations, and accrued for post-retirement employment benefits on an undiscounted basis for severed employees and retirees of the sold business. GATX retained responsibility for the liability. Subsequently, erroneously-calculated expenses for post-retirement employment benefits of the former employees in those sold businesses were charged against the accruals. GATX had previously waived them as immaterial, but the dual approach of SAB 108 resulted in their classification as material. Thus, $19.2 million was added back to opening retained earnings as of January 1, 2006.

The finer filter of SAB 108 strikes again.

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