3 / 14/2019 WSIT GE'S Accounting on Alstom Power Bid Raises Questions BY MICHAEL RAPOPORT* for something that will only the Securities and Exchange add $6 to its net worth . In re - Commission is investigating* When General Electric CO .` cording goodwill that exceeded{ the write - down . bought Alstom SA'S power the cost of the acquired power _Following the 2015 Alstom business in 2015 , it cost it a lit -\\ - business , GE was essentially purchase , GE boosted the the more than $10 billion . But telling investors that the Al - deal's goodwill further , to When GE, put the acquisition on 1 storm assets it bought had a net $17.3 billion in 2016 . GE later its books , something odd hap - worth less than zero . held off on reducing the value pened . The company recorded GE'S unusual move didn't of the goodwill as the deal $13.5 billion in goodwill .\\ violate accounting rules , but it soured and the unit that Goodwill is the excess s is one of a number of puzzling* , houses the assets struggled .\\ amount that a buyer spends on decisions the company made \\A GE spokeswoman said the a target above the accounting* & in recent years regarding company's goodwill account - value of the things it paid for .\\ . goodwill . The conglomerate ing has followed accounting In effect , it is the $4 that* I stunned investors last fall I rules and been properly dis - squares up the balance sheet\\ I when it erased $2.2 billion in closed . "We will continue to be When a company spends $10 goodwill from its books , and transparent in our account - ing ," she said . A Deal That Kept Looking Worse Increasing goodwill had the General Electric booked goodwill on its Alstom deal above the $70.7\\ effect of enabling GE to avoid billion cost to the company , and later boosted good will further . The costs that would have reduced move lowered the net value of the tangible assets GE acquired . its earnings . Not writing it down delayed investors' real - ` Goodwill { Net value of tangible assets acquired Ization of how deep the con - glomerate's problems ran . "There should have been a Alstom value ( Sept . 2015 )| write- down long before , " said GE prelim value ( Nov. 2015 ) Lynn Turner , a former SEC chief accountant .\\ GE final value ( Dec . 2016 )| Part of the reason for so much goodwill from the Al - -$5 billion 10 15 storm deal , GE, said in a secult S Note : Tangible value of net assets excludes goodwill and other intangibles ties filing , was " estimated GE - Alstom figures converted from euros .\\ specific synergies , " such as Sources : Alstom and GE financial reports. Please turn to page BIO GE'S the aggressive side," he said .\\ AS GE raised goodwill , it ef -\\ _avoided costs that could have bath was possible . Still , there weighed on its earnings each fectively reduced the value it a quarter for years . are indications GE'S leadership knew much earlier that the Accounting placed on the Alstom hard as - Many types of assets lose* sets it acquired . Just before value as they age , leading to *\\ power segment had problems . In April 2017 , GE'S indus - Puzzling the sale , Alstom placed a net regular depreciation or amor -| trial businesses posted sharply value of about $600 million on tization costs that count negative quarterly cash flow , the tangible assets and liabili against a company's earnings .* ties it was selling to GE , ex - raising concerns about the But goodwill suffers no auto -\\ Continued from page B 1 cluding goodwill and other in - \\_health of the power business . matic loss of value , so there Jeffrey I'mmelt , then GE'S chief tangibles . But when GE added aren't any amortization costs .` additional revenue from GE $ those items to its own balance GE conducted regular good -\\ executive , told the company's and Alstom product lines . sheet , net tangible value was will tests as required ; compa - _ board in 2017 that manage - J . Edward Ketz , a Penn about negative $6 .2 billion . ment had identified risks in State University associate pro - nies can't write down their the power division , but he fessor of accounting , said that .Among the reasons for the goodwill until and unless they* played them down , The Wall while GE's accounting follows changes , GE said , were revi - fail a goodwill test . It also en - street Journal has reported . sions of some of its valuations , gaged an independent firm to the rules , he couldn't recall The board learned of the additions of $990 million to another case in which the legal reserves and the change* review its decisions on good -\\ ` will . But the company took depth of the problems in Sep - goodwill a company recog - t nized from a deal exceeded its to U. S. accounting standards . only relatively modest charges? tember 2017 , according to the Journal , and GE acknowledged By increasing goodwill and before the 2018 write-down ,\\ them publicly shortly thereat - cost . " The justification is on ` _reducing tangible assets , GE though it did suggest a bigger " ter