Hewlett-Packard Co has decided to take the charge it is required to set against its figures to account for the mandated change in the way post-retirement benefits other than pensions are allowed for with its fiscal 1992 figures, and has restated its figures for this year accordingly. It has applied the charge, which works out at $544m, to its first quarter figures, and the effect is that first quarter profits, originally reported as $306m or $1.21 a share, have been restated as a loss of $30m. The rule requires companies to account for non-pension, post-retirement benefits, such as medical benefits for retired employees, on an accrual basis instead of a pay-as-you-go or cash basis. US companies are required to adopt the rule no later than the end of 1993, which in Hewlett’s case meant the first quarter of its fiscal 1994. In addition to the one-time charge, the company’s incremental expense for its 1992 fiscal year will be $23m pretax, causing a slight restatement of its results in the second and third quarters. The second-quarter earnings, originally $326m, were restated as $323m, and third quarter earnings, originally $191m, were restated as $188m. Where it is open to them, companies tend to take such mandatory charges in years where the overall out-turn will be disappointing rather than spoiling a good year with them, and Hewlett-Packard’s third quarter figures were worse than anyone had forecast: it was presumably this that persuaded it to take the charge now.
