Accounting Misdeeds at General Electric

Authors

  •   Rajesh Pathak Assistant Professor, IBS Hyderabad, ICFAI Foundation for Higher Education, Survey Number 156/157, Dontanpally Village, Shankarpally Mandal, R.R. District, Hyderabad, Telangana - 501 203
  •   Geeta Research Associate, IBS Hyderabad, ICFAI Foundation for Higher Education, Survey Number 156/157, Dontanpally Village, Shankarpally Mandal, R.R. District, Hyderabad, Telangana - 501 203
  •   Satish Kumar Assistant Professor, IBS Hyderabad, ICFAI Foundation for Higher Education, Survey Number 156/157, Dontanpally Village, Shankarpally Mandal, R.R. District, Hyderabad, Telangana - 501 203

DOI:

https://doi.org/10.17010/ijf/2015/v9i12/84380

Keywords:

Accounting Fraud

, General Electric, Commercial Paper, Hedge Accounting, Bridge Transactions

G11

, G12, M41

Paper Submission Date

, March 2, 2015, Paper sent back for Revision, July 6, Paper Acceptance Date, September 21, 2015.

Abstract

The case discussed the accounting fraudulent activities at the U.S. - based market leader of electronics industry, General Electric (GE). SEC suspected that between 2002 and 2003, GE bent the accounting rules to either inflate earnings or hit the analysts' consensus earnings expectations. In 2005, SEC initiated an investigation and filed a complaint alleging the conglomerate of using improper hedge accounting and revenue recognition schemes that misled the investors. In August 2009, GE settled the claim, without admitting or denying allegations, by paying the SEC a $50 million penalty in response to this civil suit filed against the company. The case encouraged debate over the intentions of GE, since in the past, similar fraud cases were reported against this electronics giant. Moreover, the ethical implications of such irregular accounting practices were also discussed as GE had hurt and cheated its investors by indulging in such unethical practices.

Downloads

Download data is not yet available.

Downloads

Published

2015-12-01

How to Cite

Pathak, R., Geeta, ., & Kumar, S. (2015). Accounting Misdeeds at General Electric. Indian Journal of Finance, 9(12), 7–18. https://doi.org/10.17010/ijf/2015/v9i12/84380

References

Fortune. (2015, January 04). Most admired 2014. Retrieved from http://fortune.com/worlds-most-admired-companies/2014/general-electric-10/

GE History. (n.d.). From inspiration to industry. Retrieved from http://www.ge.com/about-us/history/1878-1904

GE to pay $40M to settle suit accusing it of misleading investors in 2008. (2013, April 30). Insurance Journal. Retrieved from http://www.insurancejournal.com/news/national/2013/04/30/290210.htm

General Electric Company. (n.d.). Governance principles. Retrieved from http://www.ge.com/sites/default/files/GE_governance_principles.pdf

General Electric's lessons in product innovation. (2013, February 01). Strategy + Business. Retrieved from http://www.strategy-business.com/article/re00222

Glader, P., & Scannell, K. (2009, August 05). GE settles civil-fraud charges. The Wall Street Journal. Retrieved from http://www.wsj.com/articles/SB124939838428504935

Goldfrab, Z.A. (2009, August 04). GE to pay $50 million to settle SEC fraud charges. The Washington Post. Retrieved from http://www.washingtonpost.com/wp-dyn/content/article/2009/08/04/AR2009080401258.html

Goldman, D. (2009, March 13). GE loses top rating in downgrade. CNN Money. Retrieved from http://money.cnn.com/2009/03/12/news/companies/ge_credit_downgrade/

Guerrera, F., & Chung, J. (2009, August 05). GE settles claims of fraud in accounts. Financial Times. Retrieved from http://www.ft.com/intl/cms/s/0/97a92022-8107-11de-92e7-00144feabdc0.html#axzz3jXmlSDdR

Henry, D. (2009, August 04). SEC fines GE $50 million for accounting misdeeds. Bloomberg Business. Retrieved from http://www.businessweek.com/bwdaily/dnflash/content/aug2009/db2009084_567813.htm

Hogan, J.M. (2009a, Sep 01). The SEC's investigation of GE accounting. Law 360. Retrieved from http://www.law360.com/articles/116750/the-sec-s-investigation-of-ge-accounting

Hogan, J.M. (2009b, Sep 08). United States: When success raises suspicions: The SEC's risk-based investigation of General Electric's accounting practices. Mondaq. Retrieved from http://www.mondaq.com/unitedstates/x/85418/Corporate+Crime/When+Success+Raises+Suspicions+The+SECs+RiskBased+Investigation+Of+General+Electrics+Accounting+Practices

Leone, M., & Reason, T. (2009, August 04). GE settles accounting fraud charges. CFO. Retrieved from http://ww2.cfo.com/accounting-tax/2009/08/ge-settles-accounting-fraud-charges/

NASDAQ.com. (2015, September 21). General Electric company revenue & earnings per share (2015, September 21). Retrieved from http://www.nasdaq.com/symbol/ge/revenue-eps

Schulte, E. (2002, February 09). Suffering for Enron's sins: Are the jitters overdone? The Wall Street Journal. Retrieved from http://www.wsj.com/articles/SB1013191090388676640

SEC sues GE over fraudulent accounting. (2011, August 01). Fox Business. Retrieved http://www.foxbusiness.com/markets/2009/08/04/sec-sues-ge-fraudulent-accounting/

Taub, S. (2008, September 08). Will GE hedge accounting pass muster? CFO. Retrieved from http://ww2.cfo.com/accounting-tax/2008/09/will-ge-hedge-accounting-pass-muster/

Tell me, Mr. President: What is it that is so special to you about GE? (2011, January 24). If Liz were queen. Retrieved from http://iflizwerequeen.com/2011/01/24/tell-me-mr-president-what-is-it-that-is-so-special-to-you-about-ge_q_6164.html

United States District Court, District of Connecticut. (2009, August 04). Securities and Exchange Commission vs. General Electric Company. Retrieved from http://www.sec.gov/litigation/complaints/2009/comp21166.pdf