David Allison When the history of the current economic crisis is ultimately written, accountants likely will get a lot of the blame for causing it.
And Paul D. Beckham thinks that's wrong.
"People should realize that the accounting world is not overall a dishonest world," says Beckham.
Beckham knows accounting. He joined Turner Broadcasting System Inc. as the company's controller in 1970 and later became chief accounting officer and senior financial officer. While at Turner, he was involved in the company's purchase of the Braves and Hawks, the purchase of the MGM film library, the attempted acquisition of CBS, the purchase of CNN Center, and the launch of CNN and Headline News. He left the company at the end of 1993 and now runs Atlanta PR firm Hope-Beckham Inc. with partner Bob Hope.
The recognition of expenses and revenue in a particular period is not an absolute science, Beckham says. When accountants get into things like deciding whether an asset purchased years ago has retained its value, that can be extremely complex.
"I think the vast, vast majority of the accountants and the financial people that deal with this for both the public and private sector work very hard to make sure they match as best they can those expenses, those revenues, with the time period that you're talking about, so that you have a reasonably stated set of books. There's always been some bad guys who try to take advantage of things, and those guys should just be prosecuted to the fullest extent of the law. But I think we've got to be real careful. Just because something is complicated, that doesn't make it wrong. Just because it can be questioned doesn't make it wrong."
While he was at Turner, a public company, executives were aware of the company's stock price, Beckham says. "But we never really managed the books to get to a result that was expected by Wall Street when I was there."
Beckham wonders about analysts now talking about companies "cooking books" when it is those very analysts who pressure companies to meet Wall Street's expectations. "You can lose 50 percent of your market cap by missing your [earnings] number by a penny [per share]," says Beckham. "Now how does that make any sense?"
He views stock price as a longer-term representation of the value of a company. Missing earnings expectations by a small amount could mean a company has a big problem in its operations, but probably it doesn't, he says.
"But it certainly puts the pressure on the people who are responsible to the shareholders to manage numbers: Either reduce expectations with the analysts in the beginning, or if there is an item that is gray -- you can make some assumptions or you can make certain other assumptions and P&L looks just a little bit better if you do it one way versus another and neither way is wrong -- you might go a little bit with the aggressive way."
But Beckham still thinks the vast majority of the people responsible for putting together companies' financial numbers are doing it conservatively.
"I think if we realize that the business world is made up primarily of honest people, then some of the fright that's there in the market today would just go away. Because I think it's unnecessary. I think it's overblown. I think there's too much talk about it. I think overall the numbers are probably pretty good."
Copyright 2002 American City Business Journals Inc.
