Ford Motor (F) Sees One-Time Q4 Charge of $800M on Venezuelan Bolivar Accounting
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Ford Motor (NYSE: F) disclosed the following on Friday:
Historically, we have included the results of our Venezuelan operations in our consolidated financial statements using the consolidation method of accounting. Venezuelan exchange control regulations have resulted in an other-than-temporary lack of exchangeability between the Venezuelan bolivar and U.S. dollar, and have restricted our Venezuelan operations’ ability to pay dividends and obligations denominated in U.S. dollars. These exchange regulations, combined with other recent Venezuelan regulations, have constrained parts availability and are now significantly limiting our Venezuelan operations’ ability to maintain normal production. As a result of these conditions, and in accordance with Accounting Standards Codification (“ASC”) 810 -- Consolidation, we began reporting the results of our Venezuelan operations using the cost method of accounting. This change, which we made effective December 31, 2014, will result in a one-time pre-tax special item charge of $800 million in the fourth quarter of 2014.
Our Venezuelan operations’ cash balance, which was about $500 million at December 31, 2014, will no longer be reported in Automotive Gross Cash. In future periods, our financial results will not include the operating results of our Venezuelan operations. Instead, we will record cash and recognize income from our Venezuelan operations to the extent we are paid for parts we sell to them or receive dividends from them.
Ford has operated in Venezuela for the last 53 years and our operations in Venezuela will continue for the foreseeable future. We continue to work proactively with the Venezuelan official agencies to ensure they understand our Venezuelan operations’ business needs and potential production opportunities.
We continue to expect our full year 2014 total pre-tax profit, excluding special items, to be about $6 billion. Our 2014 pre-tax profit guidance is not affected by the special item charge described above. Net of deferred tax benefits, the charge will reduce net income attributable to Ford by about $700 million in the fourth quarter of 2014.
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