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The AAO Weblog covers accounting issues and current events as they relate the practice of investment analysis. All posts prior to September, 2007 are in the public domain, but after September 4, 2007, only subscribers to The Analyst's Accounting Observer will see all posts going forward. Only selected, occasional posts will be released to the public domain from September 4 forward.

HealthSouth: Over Halfway There
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Posted by: Jack Ciesielski 6/28/2005 7:20 AM
HealthSouth filed its amended 10-K for 2002 and 2003 yesterday. It was something of a two-for-one special: in addition to the restated 2002 and 2003 financials, it also contained a restatement of 2001 and 2000 financials. Still to come: 2004, and eventually, year to date information for 2005.

Some highlights:

- Cumulative net reduction to shareholders' equity of $3.9 billion as of December 31, 2001;

- Reduction in previously reported net income of $393.6 million for 2001 and $642.7 million for 2000.

- Writedowns of net goodwill and other intangible assets from $2.7 billion to $1.4 billion at December 31, 2001.

- Writedowns of property and equipment from $2.8 billion to $1.8 billion at December 31, 2001.

Those adjustments wiped out stockholders' equity; at the end of 2003, the stake of shareholders in HealthSouth was a negative $964 million.

By comparison, AIG restated earnings from 2000 through 2003 and knocked equity down by $2.26 billion at the end of 2004; it reduced 2004 earnings $1.32 billion, or 11.9%, from the previously announced $11.05 billion.

Neither company's announcements had much of an effect on their company's stock price - at least so far, in the case of HealthSouth. You could argue that the information in contained in the restatements was pretty much worked into the stock price for a long time. Or you could say that the investing world is becoming pretty much numb to multi-billion restatements.
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