Is Lexmark Going To Cook the Accounting Books With New Software?

[Anonymous]

Is Lexmark Going To Cook the Accounting Books With New Software?
Lexmark Switches to Mark-to-Market Pension Accounting
By Ben Fox Rubin

               

Lexmark International Inc. (LXK) joined a growing list of U.S. companies that have changed their pension accounting to a method considered more transparent but that can add volatility to profits from year to year.

The company changed its pension accounting in the fourth quarter to the "mark-to-market" methodology, saying it believes the new method will improve transparency of its operating performance and the various drivers of post-retirement plan expenses.

Mark-to-market pension accounting recognizes significant gains and losses in pension plans on an annual basis instead of spreading the effect over time. The method is favored by many accounting experts because it provides more immediate snapshots of pension-plan performance. For companies, it frees its results of the lingering effect of old pension losses. Major U.S. firms that have switched to the method in recent years include Honeywell International Inc. (HON), International Business Machines Corp. (IBM), AT&T Inc. (T) and Verizon Communications Inc. (VZ).

The mark-to-market change won't affect adjusted earnings results, the company said.

Excluding the mark-to-market adjustment, Lexmark said a different accounting change related to post-retirement benefits and increased contingency accrual for a legal matter would have decreased fourth-quarter adjusted per-share earnings by three cents and increased full-year earnings by 21 cents compared with the company's October guidance.

The company, like others in the technology industry, has spent years wrestling with a maturing hardware market, facing squeezed margins and weaker growth from developed economies. Unlike many of its competitors, however, Lexmark has worked to stick to its core business and add software around it. That approach is different from peers like Xerox Corp. (XRX), which have diversified further afield with new offerings, such as outsourcing.

Is Lexmark Going To Cook the Accounting Books With New Software?
Lexmark Switches to Mark-to-Market Pension Accounting
By Ben Fox Rubin

               

Lexmark International Inc. (LXK) joined a growing list of U.S. companies that have changed their pension accounting to a method considered more transparent but that can add volatility to profits from year to year.

The company changed its pension accounting in the fourth quarter to the "mark-to-market" methodology, saying it believes the new method will improve transparency of its operating performance and the various drivers of post-retirement plan expenses.

Mark-to-market pension accounting recognizes significant gains and losses in pension plans on an annual basis instead of spreading the effect over time. The method is favored by many accounting experts because it provides more immediate snapshots of pension-plan performance. For companies, it frees its results of the lingering effect of old pension losses. Major U.S. firms that have switched to the method in recent years include Honeywell International Inc. (HON), International Business Machines Corp. (IBM), AT&T Inc. (T) and Verizon Communications Inc. (VZ).

The mark-to-market change won't affect adjusted earnings results, the company said.

Excluding the mark-to-market adjustment, Lexmark said a different accounting change related to post-retirement benefits and increased contingency accrual for a legal matter would have decreased fourth-quarter adjusted per-share earnings by three cents and increased full-year earnings by 21 cents compared with the company's October guidance.

The company, like others in the technology industry, has spent years wrestling with a maturing hardware market, facing squeezed margins and weaker growth from developed economies. Unlike many of its competitors, however, Lexmark has worked to stick to its core business and add software around it. That approach is different from peers like Xerox Corp. (XRX), which have diversified further afield with new offerings, such as outsourcing.

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January 16, 2014 at 11:33 AM