Source: Bloomberg News | 2013-1-29 | NEWSPAPER EDITION
CATERPILLAR Inc, the world's largest maker of construction and mining equipment, yesterday said it's still investigating the accounting discrepancy at a Chinese business that led to a US$580 million writedown.
The company took an 87-US-cent-a-share writedown in the fourth quarter after finding a "deliberate, multi-year, coordinated accounting misconduct" at its Zhengzhou Siwei Mechanical and Electrical Manufacturing Co unit, Caterpillar said in its fourth-quarter earnings statement. Caterpillar has identified "improper revenue recognition practices."
"We are not done," the company said. "We are putting in more effort to finish our investigation as we consider all our options to recover our losses and hold those responsible accountable for their wrongdoing."
The company said it first became concerned about issues at Siwei following a count of physical inventory following Caterpillar's acquisition of the business. Siwei is part of Hong Kong-listed ERA Mining Machinery Ltd, which Caterpillar bought in October for HK$6.15 billion (US$793 million). It was Caterpillar's largest Asian deal and among US$10.3 billion of acquisitions announced by Doug Oberhelman since he became CEO in 2010.
"We believe our process is rigorous and robust and includes Caterpillar personnel and outside accounting, legal and financial advisors," Caterpillar said, referring to its due diligence process for mergers and acquisitions.