A Securities and Exchange Commission probe into General Electric Co. and its use of hedge accounting for derivatives was upgraded to a formal investigation in August, but GE delayed disclosure until its third-quarter financial statements last week.
In January the SEC’s Boston district office began an informal investigation into GE’s accounting for derivatives used to hedge risks, requesting that GE and its GE Capital division voluntarily provide documents and information.
But in its quarterly financial filing on Oct. 24, GE said SEC staff in August advised the company that the commission had elevated the probe to a formal investigation, which means SEC staff are authorized to subpoena witnesses and documents.
GE said in a statement on Wednesday it did not disclose the probe’s elevation to a formal investigation earlier because “it is part of an ongoing process (so) it was appropriate to disclose this development in the normal course, which is the next 10Q filing.
“We have continued to voluntarily provide documents and information to the SEC Staff, and we intend to continue to cooperate fully with its investigation,” the company said, calling the request for documents by the SEC a “common next step” related to the use of hedge accounting for derivatives GE disclosed in May.
GE in May restated its earnings from 2001 through the first quarter of 2005 after an internal audit found that its accounting for currency and interest rate derivatives did not comply with accounting standards.
The company at the time said the restatement resulted in a total non-cash increase of $381 million, or less than six tenths of 1 percent of total earnings, for that period.
