By Alwyn Scott
NEW YORK (Reuters) - General Electric Co
The maker of power plants, jet engines, medical devices and other industrial goods had estimated the after-tax, non-cash impact would be about $4.2 billion, plus reduced earnings for 2016 and 2017 of about 29 cents a share. The changes do not affect GE's cash flow or its earnings estimate for 2018, analysts said.
The as-expected figures suggest that GE executives have gotten to the bottom of the accounting issues and could bolster confidence in Chief Executive Officer John Flannery after a series of financial surprises, including underestimating the impact of insurance policies that prompted a $6.2 billion charge in the fourth quarter.
The new accounting standards govern how companies estimate and recognise revenue from long-term contracts, and is designed to make a company's cash flow more closely match its income, accounting experts and analysts said.
The prior standard allowed companies to recognise future revenue from such agreements more quickly. The new standard shifts revenue to later in the contract duration, analysts said.
Companies typically use the cost of providing services as a basis for estimating future revenue from the contracts, but the process can lead to over- or under-estimating the value of the contracts as assets on the balance sheet, experts say.
(Reporting by Alwyn Scott; Editing by Bill Rigby)
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