Magazine article American Banker

FAS 133 Restatements: Now Bank of America Too

Magazine article American Banker

FAS 133 Restatements: Now Bank of America Too

Article excerpt

Bank of America Corp. on Wednesday became the largest banking company yet to say it would restate years of earnings because of derivatives accounting.

The $1.3 trillion-asset Charlotte company said it had discovered "certain weaknesses in internal controls" related to hedge accounting under Federal Accounting Standard 133. It said it had addressed the weaknesses but could not change its accounting method retroactively.

The restatements will raise retained earnings before 2002 by $707 million and boost per-share earnings in that year by 3.4%, to $3.05. It will reduce 2003, 2004, and 2005 earnings by, respectively, 0.6%, to $3.55; 1.4%, to $3.64; and 2.4%, to $4.05.

Cumulatively, the restatements will increase net income by $345 million.

Robert Stickler, a spokesman for the company, said Wednesday that it used to employ the "shortcut" method to account for hedging intended to manage rate risk and foreign exchange exposure. A recent review found that B of A might not qualify for that method, partly because of documentation issues and partly because of how the accounting board now interprets FAS 133, Mr. Stickler said.

B of A, the nation's second-largest banking company, has touted its sophisticated, hands-on balance-sheet management, which has sometimes drawn criticism. Mr. Stickler said the hedging is tied to the size of its balance sheet -- with $574 billion of loans and $635 billion of deposits at yearend 2005 -- and not to how it manages operations. …

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