Market Watch

[Joemoney]

Companies Try to Ease Accounting Fears

By Julie MacIntosh

NEW YORK (Reuters) - The fallout triggered by the Enron Corp. (NYSE:ENE - news) scandal has taken on a life of its own, fueled by investor anxiety, and now is reaching into the nooks and crannies of major boardrooms across Corporate America.

Far from being limited to companies known for opaque accounting practices or to those with dubious records on corporate ethics, the maelstrom surrounding the collapse of Enron, the energy trading giant, has many U.S. corporate titans on the defensive.

``Investors have learned through a painful situation that where things are opaque ... you either shouldn't be invested in it, or you'd better keep asking questions until you get a full understanding,'' said Phil Livingston, president of Financial Executives International, a corporate officers' association.

While investors clamor for more openness, corporate executives argue that too much disclosure can put them at a competitive disadvantage. A decision by U.S. companies to throw their books wide open to the public is unlikely at best.

The inquisition began in earnest this earnings season, as U.S. companies responded to queries from analysts and investors over aggressive accounting and questionable corporate ethics.

Manufacturing conglomerate Tyco International Ltd. (NYSE:TYC - news), energy trader Williams Cos. Inc. (NYSE:WMB - news), and travel and real estate firm Cendant Corp. (NYSE:CD - news) each watched their shares drop sharply last week as fears over accounting issues gripped the markets.

To ease investor concerns, other U.S. companies were up front, outlining accounting practices for analysts and investors.

Louis Camilleri, chief financial officer at Philip Morris Cos. Inc. (NYSE:MO - news), fielded questions during a Jan. 30 conference call about whether the consumer products giant would disclose more information about its business units.

Camilleri told analysts on the call that Philip Morris makes a ``huge effort'' to ensure that investors can determine its true operating results. ``So I don't envisage any further increase in our disclosures, I think we disclose a lot,'' he said.

Procter & Gamble Co. (NYSE:PG - news), the consumer products group, told analysts during its earnings conference call last Thursday that it ``strives to present its financial information as clearly as possible.''

And before delving into a discussion on Honeywell International Inc.'s (NYSE:HON - news) exposure to potentially costly asbestos-related litigation, Chief Executive Lawrence Bossidy quipped that ``since this is not Enron, we're going to tell you exactly where we stand.''

Companies whose outside financial auditors doubled as consultants -- a relatively commonplace practice -- have also dropped into the frying pan.

Walt Disney Co. (NYSE:DIS - news) responded Thursday to the now ''highly criticized'' practice of using financial auditors as consultants, saying it will not sign new consulting deals with PriceWaterhouseCoopers, its outside auditors.

PriceWaterhouseCoopers, the largest U.S. accounting firm, said separately Thursday it would spin off its consulting unit in an initial public offering,

The firm's chief executive, Sam DiPiazza Jr., said PriceWaterhouseCoopers did not believe independence was an issue, but acknowledged that ``the perception of independence is critical in capital markets.''

Along with impartiality, transparency is key, some argue.

``The world has gotten so litigious that lawyer-speak has taken over financial reporting disclosures,'' said Livingston, of the corporate officers' association. ``What we need is a return to simplification and clarity.''

The current scenario, where skittish investors overreact out of fear while regulators implement knee-jerk decisions that aren't good for the whole system, is also untenable, Livingston said.

``The capital markets have been shaken, investors are shaken, and so I think companies are trying to be more open in this environment,'' he said. ``They have to be.''

http://biz.yahoo.com/rb/020203/business_financial_accounting_dc_1.html