Firms Citing Terrorism Costs in Profit Reports

Accenture Ltd. investors may have been surprised recently when the firm said it would take a $40-million third-quarter charge for the Sept. 11 terrorist attacks.

After all, accounting rule-makers, in a much-publicized decision in late September, had said companies must include costs related to the attacks as part of their continuing operations and not present them as “extraordinary” one-time charges.

But Accenture is just one of many U.S. companies that have rushed to quantify losses from the attacks anyway.

The accounting body, the Financial Accounting Standards Board, opposed creating special charges for the attacks because, it said, it’s tough to isolate losses from a single event or even a series of events.

Companies are complying, but in many third-quarter earnings reports firms have underscored how the attacks hurt business.

In some cases, they have isolated specific costs in an effort to allay investors’ worries about large bottom-line losses.

Consulting firm Accenture sidestepped the issue by avoiding the term “extraordinary” in describing losses, which accounting rule-makers had explicitly disallowed.

Instead, Accenture referred to “unusual” losses brought on by the attacks, even though these costs were included in the firm’s continuing operations under generally accepted accounting principles.

But whether they are called unusual or extraordinary, the effect may be the same: Individual investors and Wall Street pros alike have been conditioned to ignore such special charges when evaluating a company’s performance.

Other examples abound. Bank of New York Co., for example, in its quarterly earnings news release, emphasized earnings-per-share figures that excluded the costs of the disaster.

Several other firms have issued press releases with estimates of revenue they say they might have booked but for the attacks.

Some analysts say the more information a firm provides about the effects of the disaster on its bottom line, the better equipped investors are to judge the company’s core business.

“I always believe the more ... itemized the statements are, the better it is for investors,” said Pat McConnell, an accounting analyst at brokerage Bear Stearns.

Indeed, some accounting experts said the FASB’s ruling in September would favor companies that wanted to blame all of their problems on the fallout from the attacks.

Without being forced to itemize those costs, everything could be swept under the same rug, even if much of the damage was the result of poor management decisions in a weak economy, some accounting analysts said.

Others, however, say some of the language in third-quarter reports regarding attack-related costs borders on a direct attempt to mislead investors.

“This reminds me of when someone says, ‘Boy, our football team would have won by two touchdowns if only our star running back hadn’t been out with an injured knee or our quarterback didn’t have a sore elbow,’ or whatever,” said David Levy, chairman of the Jerome Levy Forecasting Center, an economic and financial research Institute.

Software firm SeeBeyond Technology Corp., which reported a $2.9-million third-quarter pro forma loss last week, said it would have been profitable were it not for the Sept. 11 attacks, which the firm said pushed back some big sales deals.

Applera Corp.’s Applied Biosystems Group, a maker of equipment for analyzing genes, said last week that disruptions from the attacks led to an estimated $15 million in lost revenue.

“It’s so speculative--it’s entirely foreign to any accounting model I’ve ever known,” Bob Willens, an accounting analyst at Lehman Bros., said about such reporting.