Amoco Corp. said Tuesday it will take a series of charges and credits against 1992 earnings, resulting in a bottom-line charge of about $750 million, to take account of changes in financial accounting standards for income taxes and post-retirement benefits.
First, the Chicago-based energy giant will record as of Jan. 1, 1992, a charge of $950 million, or $1.91 a common share, to take account of the effect of both of the financial accounting standards for years prior to 1992.
Second, the earnings for the first three quarters of this year will be restated to include an after-tax credit of about $140 million for changes in income tax accounting, minus a charge of about $40 million for changes in post-retirement accounting. Projecting those charges for the full year, the company expects to book a credit of $200 million.
The $200 million credit would be more than offset by the $950 million charge, resulting in an overall debit of $750 million, or about $1.50 a common share.
Under the new accounting standards for post-retirement benefits, which in Amoco`s case mainly apply to life and medical insurance, companies are required to accrue the cost of post-retirement benefits over the estimated remaining years of service of employees. Before, those expenses were accounted for as they were paid. The future effect on Amoco is expected to be negligible.
Concerning income taxes, Amoco has adopted a new accounting method to measure the effects of currency exchange rate changes on foreign deferred taxes associated with non-monetary assets. The future effects of that change will depend on current exchange rates.
