Digging dirt but burying Executive negligence, Caterpillar way

Wrong Way to Admit You Blew Millions of Dollars - Bloomberg: "Somewhere in the vast interior of China last year, almost a half-billion dollars of cash belonging to Caterpillar Inc. (CAT) vanished. So how did the company soften the blow when it broke the news to investors?

Easy. Caterpillar said the loss was “non-cash.” See? Accounting tricks don’t have to be complex after all.

This sort of abuse of the English language is routine in corporate disclosures and has long been a pet peeve of mine. Here’s the drill: First a company like Caterpillar makes a big acquisition. It pays cash. Then the company it bought turns out to be a wreck, maybe even a fraud.

The rules say Caterpillar must write down the value of what it bought -- or, more precisely, what it mistakenly believed it had bought, because the assets it paid for never existed in the first place. Calling the loss non-cash makes it seem like Caterpillar didn’t lose any real money. It’s like reverse alchemy, turning gold into straw, at least for public-relations purposes."

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