Ashland Oil Inc. predicts a change in its accounting procedures will cause a net charge of about $290 million and significant loss in the company's current fiscal year.
The loss will include special item charges totalling about $100 million after tax in its fiscal fourth quarter ending this Sept. 30. The items cover reserves for environmental costs, various asset impairments, and implementation of a voluntary retirement program.
"Without these charges, Ashland was expecting to earn a modest profit in the September quarter, while earnings for the year would approximate the company's $1/share annual dividend," said John R. Hall, Ashland chairman and chief executive officer.
The accounting change involves adoption of Financial Accounting Standards Board Statements 106 and 109 for Ashland's fiscal 1992 that began Oct. 1, 1991.
Statement 106 requires future costs of providing retiree benefits, such as health care and life insurance but excluding pensions, to be recognized as an expensive as employees render service instead of when the benefits are paid, as Ashland and most other companies historically have done.
The financial effect of adopting this standard in 1992 reflects the immediate recognition of such future benefits costs, based on existing retiree programs.
Ashland plans to change its retiree benefit programs effective Jan. 1, 1993, to significantly reduce costs. The change will limit the annual amount of health care inflation Ashland will pay thorough its retiree medical plans.
In addition, retirements after Dec. 31, 1992, will be subject to a cost sharing method based on years of service of the retiree.
Statement 109 changes accounting for income taxes.
Copyright 1992 Oil & Gas Journal. All Rights Reserved.
