General Electric Case Study

1048 Words3 Pages

AC 348 Case

General Electric
The Impact of DB Pension Plan Accounting in Financial Presentation

Zachary Shwartz
Michael Ganley
Daniela Velez
General Electric (GE) is a public company that provides services in the following segments: Energy, Technology, Infrastructure, Capital Finance, as well as Consumer and Industrial. GE, along with 3M and Siemens, all compete in the Diversified Machinery Industry whose products range from large turbines and medical equipment to laundry machines and coffee pots. This is a unique industry that has pure competition where companies have products that are mechanically the same, but is completely open for differentiation of those products. Products will lack value if they are not differentiated from their competitors’ products in the eyes of the consumer. Additionally, innovation is extremely important in this industry causing those who do not innovate to lose profitability quickly.
General Electric’s competitors are separated into two different tiers. The first tier of competitors are those that are direct competitors and include Honeywell, Siemens AG, United Technologies Corporation, and 3M Company. These companies compete with General Electric on a product basis. For the most part, these companies produce the same type of products. On the second tier of competition, General Electric is competing on the services side of business. General Electric competes with Bank of America, JPMorgan Chase, News Corporation, Viacom, and The Walt Disney Company. These companies all provide the types of financial services such as general lending, leasing, and asset management. Since the service and financial portion of the business does not hold precedent over the products they produce, these...

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... the ratios.
In conclusion, we have realized the significance of including just the netted plan assets and the PBO and not including the full amount of the plan assets and the PBO on the balance sheet. This type of accounting flexibility by the FASB helps companies and ultimately hurts investors who are unaware of the consequences. Usually, the estimated PBO and plan assets are very large in relation to the debt and equity capitalization of the company. The financial situation is therefore skewed and is not represented correctly on the company’s balance sheet which then in turn distorts financial ratios. Investors who are unaware of these accounting rules will end up making erroneous conclusions. Also, this accounting flexibility allows managers to manipulate financial statements whether intentionally or unintentionally by influencing their actuarial assumptions.

In this essay, the author

  • Explains that general electric is a public company that provides services in the following segments: energy, technology, infrastructure, capital finance, as well as consumer and industrial.
  • Explains that general electric's competitors are divided into two different tiers: direct competitors honeywell, siemens ag, united technologies corporation, and 3m company.
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