July 22, 2003
Reuters News
WASHINGTON - The chief financial officer of Freddie Mac (FRE.N), the
No. 2 U.S. mortgage finance company, said on Tuesday financial
results for periods before 2000 will be affected by a restatement of
results.
In prepared
remarks to a congressional committee, Martin Baumann said: "Freddie Mac's
financial results for periods prior to 2000 will also be affected by the
restatement. The impact of these corrections for periods prior to 2000 will be
reflected as an adjustment to the beginning balance of retained earnings as of
January 1, 2000."
Freddie Mac
said last month it would restate earnings for 2000, 2001 and 2002 upward by as
much as $4.5 billion stemming largely from its accounting for derivative
contracts.
Freddie Mac's
outside directors have hired the law firm of Baker Botts to probe accounting
errors underlying the restatement. Baumann said a report from the firm may be
released "possibly as early as tomorrow."
The House of
Representatives Commerce, Trade and Consumer Protection Subcommittee convened a
hearing on some of the accounting standards, as defined by the Financial
Accounting Standards Board, at the heart of Freddie's restatement.
"The turmoil
at Freddie Mac has put FASB's rules once again in the spotlight," said Rep. Janice
Schakowsky, an Illinois Democrat, in
opening remarks at the hearing.
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