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GE Accounting Lands In SEC Crosshairs

The U.S. Securities and Exchange Commission (SEC) has reportedly opened an investigation into the accounting practices of digital industrial company General Electric (GE).

Washington Post reports this week said GE revealed the SEC's probe was linked to its disclosure of a miscalculation in its insurance unit. According to the news article, GE admitted it had underestimated the cost of insurance for individuals who live longer than expected, costing the company $15 billion.

The SEC is now probing to understand how GE miscalculated its projections and other potential issues in its accounting tactics, including how it tallied revenue from its power plant, jet engine and other industrial equipment sales via long-term service agreements.

“It's very early days,” said the company's chief financial officer, Jamie Miller, in a call with analysts this week. “There's nothing here I'm overly concerned about.”

The Washington Post said the SEC had not yet commented on the investigation.

GE released its Q4 2017 earnings data earlier this week, revealing a one-time $6.2 billion tax charge related to the nation's recent tax reform. The company also said that its financing unit, GE Capital, will make up for the $15 billion cost of its insurance operations by making statutory reserve contributions over the course of seven years. Stocks plunged following the earnings report.

According to the Washington Post, the energy company's stocks have declined more than 40 percent over the last year, a result of ongoing financial struggles. Its Q4 losses totaled $10 billion, a large decline compared to the $3.48 profit the company posted during the same period a year prior.

“GE Needs to hit 2018 targets on cost cuts, asset sales and improved earnings and cash flow,” said Jim Corridore, independent investment research firm CFRA equity analyst, in a research note cited by the publication. “We will look for progress before becoming more positive.”

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