Brunswick "creative accounting"

I think, but I'm a math guy doing IT, that what Brunswick just did was to screw GE. I am guessing that a lot of those receivables aren't going to be received. So before, the Brunswick subsidiary would be out the dough. Now it look like when Genmar and all the others yet to go bankrupt pay pennies on the buck for the engines and drives they installed over the last few months, GE takes the hit.
 
geriksen said:
I am not a CPA or an accountant but it looks to me like Brunswick is "selling receivables" to itself so they are not on the balance sheet.
What do you guys think?


http://money.cnn.com/news/newsfeeds/articles/prnewswire/200906041600PR_NEWS_USPR_____CG27979.htm
Click to expand...


It’s not fishy at all.

This is allowed under GAAP.

It does show the pressure the accountants are under to manage cash.

I’ve said it before and Ill day it again, right now Brunswick is not managing for profit, they are managing cash flow. In the short term, profit is not important. Having cash to continue operations is what matters most.
 
fc3 said:
I think, but I'm a math guy doing IT, that what Brunswick just did was to screw GE. I am guessing that a lot of those receivables aren't going to be received. So before, the Brunswick subsidiary would be out the dough. Now it look like when Genmar and all the others yet to go bankrupt pay pennies on the buck for the engines and drives they installed over the last few months, GE takes the hit.
Click to expand...

Brunswick is liable for uncollectable receivables.

It’s like Payday loans. You get the money today and they get your paycheck.
 
What can I say? I have a suspicious nature.
 
Presentation said:
Brunswick is liable for uncollectable receivables.

It’s like Payday loans. You get the money today and they get your paycheck.
Click to expand...

Then why do it? It seems to me like it is still a receivable but since it is moved over to another (non brunswick) balance sheet that this would give brunswick's numbers a false appearance that these receivables have been collected.
If someone (shareholders maybe?) looks only at the brunswick balance sheet and does not know about this CDF ventures, wouldn't they be getting an incomplete picture?

I understand this may be accepted practice but it sounds somewhat like what got Enron and Arthur Anderson in trouble.

I guess maybe they are just borrowing against receivables to raise cash.

I wonder if some of those receivables are from Gennmar?
What if they sold those over and they will never be collected?

Maybe you are right and it is just a cash flow move.

I just still have Irwin Jacobs news releases about how things are fine and he has a plan and two months later.... chapt11 , fresh in my mind.

I don't believe those press releases anymore....

GE sure is exposed in all of this... the buck will finally stop there if things keep sliding.
 
Well, Brunswick stock has gone from about $35/share 2 years ago to about $5/share now so yes, they have issues but that’s no secret.

Its very likely that some of the accounts receivable will not be collectable.
However selling receivables is needed to keep the doors open this quarter to meet payroll, pay suppliers, etc.

Basically this move buys them time, months, not years, to further cut spending or increase revenue.

An economic recovery would help increase revenue. Barring an increase in revenue the cuts in spending, furloughs, asset selling will need to continue.

GE does stand to make money out of this deal, sort of like Potter in it’s a wonderful life.
 
I would like to add a few comments. Finance companies under GAAP are not consolidated with manufacturing companies because their business is so different. Although seperate financiaqlws need to be shown.

GE is not getting screwed don't worry. What Bruinswich is doing is using their accounts receivable to get cash to keep the business going and in the old days growing. They are using an asset to do that---many of you used an asset wwhen you put your boat or car or house up as collateral. The asset Brunswich is using in this case i8s their accounts receivable, because of their usual short term nature they can be financed at a "lower" rate than other assets e.g. machinery. The amount lent on the aqccounts receivable varies depending on the age of the account. e.g. how many days past due. As the amount of accounts receivable goes up the company can borrow more thereby allowing for growth when the business returns. as sthe amount of accounts receivable outstanding gets small so does the amount of funds that can be borrowed against them.

This is more "transparent"than the previous way, now they have to show the asset and liability on their books.

I have doine several of these deals with GE and I caqn assure you GE is very good at protecting their loan.
 
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