The SEC's Credibility GAAP

The Securities and Exchange Commission is letting a number of large companies get away with questionable accounting based on some pretty lame excuses.

Consider Coca-Cola Co. In September, the SEC contacted the soft drink giant about its use of an accounting metric that made its earnings look better than they actually were. Coke said its "structurally adjusted" pretax earnings in the second quarter rose 10 percent. Its actual pretax profits dropped 1 percent. To get to the increase, Coke excluded costs tied to a "productivity and reinvestment program," which the company said would take years to complete. So the SEC questioned whether the expenses were truly one-time items, which companies can exclude, or likely recurring expenses, which they cannot. Coke's response: The company never told shareholders the expenses were nonrecurring. It called them "items impacting comparability." See the difference? The SEC did. Just 14 days after contacting Coke, the SEC closed the inquiry.