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Ford Could Add Extra $13 Bil to 2011 Profits

Accounting change alone could double 2010 earnings.

by on Mar.07, 2011

Ford could add $13 billion to earnings through an accounting change reflecting its improved performance.

Ford Motor Co. could be in for a whopping $13 billion profit, this year, simply from an accounting change that reflects the increased optimism about the Detroit maker’s financial health.

That move would dwarf the $6.6 billion Ford earned during 2010, even before the maker actually posted the results of its automotive and financial services operations.

At the end of 2010, Ford revealed it had reserved $15.7 billion in what is known as a valuation allowance, which is held against deferred tax assets.  That is one of the largest figures among any U.S. corporations and, notably, the company must remove the item from its books, according to tax laws, once it is in a period of sustained recovery.

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With Ford expected to post another significant profit for 2011, “We would remove our valuation allowance,” spokesman John Stoll said, “if that continues.”

The maker is expected to take the step sometime this year and would likely report the change as a special, one-time action in order to minimize the tax impact.

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