Can anyone figure out how to account for derivatives? Apparently not one of the biggest investment banks in the world.
In a Monday regulatory filing, Merrill Lynch disclosed that it would restate previously issued cash-flow statements going back to 2005 to correct errors stemming from an adjustment that “incorrectly reflected cash flows received from certain customer transactions.”
That adjustment spawned an overstatement of cash flows received from derivatives-financing transactions and was offset by a corresponding overstatement in cash flows used for trading liabilities, according to the investment banker.
The restatement reduces cash provided by financing activities by $22.9 billion in the first nine months of this year. It also cut cash provided by financing activities by $15.7 billion for 2006 and by $4.6 billion for $2005.
The company reported that the error did not affect earnings statements, balance sheets, or other reports. Further, the company’s compliance with any financial covenants under its borrowing facilities was not affected, Merrill stated.