WILLIAM D. COHAN has a rather harsh op-ed in the New York Times about Goldman Sachs’s reported $ 1.8 billion in profits in the first quarter. Ah op-eds about accounting in the New York Times. He notes, as many have on the web, that Goldman Sachs lost December 2008 when they switched from a fiscal year ending November 30 2008 to a new year starting January 1 2009. Ooops.
Part of the answer lies in a little sleight of hand. One consequence of Goldman’s becoming a bank holding company last year was that it had to switch its fiscal year to the calendar year. Previously, Goldman’s fiscal year had ended on Nov. 30. Now it ends Dec. 31.
As a result, December 2008 was not included in Goldman’s rosy first-quarter 2009 numbers. In that month, Goldman lost a little more than $1 billion, after a $1 billion writedown related to “non-investment-grade credit origination activities” and a further $625 million related to commercial real estate loans and securities. All told, in the last seven months, Goldman has lost $1.5 billion. But that number didn’t come up on Monday. How convenient.
Quite but wouldn’t the more natural number to compare with the profit of 1.8 billion in the past three months be the profit of around 800 million in the past four months ? That would be total profit (not loss) since the last quarterly profit and loss statement. The loss in the September-October-November 2008 has already been reported. Why re-report it ?
I’d say Mr Cohan knows a little bit about sleight of hand no ?