Morrison's is right tho? Program accounting is appropriate for Boeing and while deferred cost matters it's not a cash cost. They've already "paid" for the program, there is a reason we look at free cash flow. If the don't hit their program numbers they've overstated their profit but it doesn't effect their cash.
Accountants are boring but you lads need to understand a little about finance. Accounting can be kind of elegant, it gives you tools to understand how money moves through a business. .
Accounting is boring and unimportant till you run into problems. If you look how fast S&P downgrades Boeing credit ratings, it almost looks as if some in the finance community praise you when there are no problems, but suddenly remember the balance sheet when you're in trouble. It's true, one can operate with negative equity if the cash flow is still ppositive (or you've someone to finance it), but the consequences of negative equity when it all stops can be resulting in having the cash flow problems as it can hit its ability to finance its operations. I'm not familar with the debt convenants Boeing has with its financiers, but a BBB rating can already trigger additional collateral requirements, but should it become non-investment (just 2 notches away) then it will surely trigger many negative consequences (as some companies are forbidden to invest in such companies). To be honest, despite what Boeing management has done in the past, I don't think Boeing deserves going into junk terrotiry. Then again, any company receiving a bail out is de facto insolvent and its credit score should reflect that.
BTW isn't it an idea that Boing decreases the deferred cost considerably as nobody would care if it would have a loss anyway? Or would USGAAP prevent this from happening?
I am a portfolio manager and have been involved with the Markets for 30 years now and thankfully have successfully managed through every crisis including this one in which as of Friday I was up about 10% for my clients.
If you think Boeing is full of Clown's and Monkey's you would be shocked by the lack of knowledge in my industry and how it changes definitions to further the relentless push of stock market prices. I can't remember when it changed but at one point in time your debt had to rated BBB Plus to be considered Investment Grade. In order to further Companies abilities to borrow at good rates that standard has slackened over time. A lot of it has been for buying back stock which I do think is a really bad idea - it's okay if it's from Cash Flow and not really different from doing one time special dividends. If the company really doesn't need the money from operations it should give it to its owners assuming it has a sufficient cushion for operations. How big that cushion need to be is open for debate. People prefer buybacks as they don't want to pay the tax on the Special Dividend.
Arguably what Boeing should be doing is selling stock in the market to fund its operations and support itself and its suppliers who are mostly publicly traded as well should be doing the same thing. The share prices are not at zero. If Boeing sells 20% of it's shares at this time that is probably somewhere around $15-18B - the stock price might actually go up as People would not be fearful of them going out of business. They could also probably get a loan (Banks have basically unlimited lending power right now) secured by the MAX inventory.
It should not require a handout. There are ways around it.
But then again it's one set of clowns and monkeys lobbying an even bigger set of clown's and monkey's for a handout who seem to be lower on the intelligence scale.
There was one policy response that all Governments should have done at the beginning of this crisis as it is just a moment in time and at this point it looks like it fortunately will not be fatal enough to meaningfully reduce the labour capacity of any country.
The correct policy response would have been to Guarantee or help Companies fund all payrolls worldwide (with the promise Companies would not lay anyone off or fire them) and send people home for a Holiday for 30 days to break the back of this, instead of trying to support them once they had already been fired.
In most countries if a Company has $1 in payroll expense .55-.65 goes to the employee and the rest to the Government to pay for benefits and taxes.
If the Government had simply rebated what was paid for the previous month and foregone any contributions for the current that would have almost fully funded most payrolls for the first 30 days of the crisis - if the crisis had gone beyond 30 days then a companies payroll cost would only be 55-65% of what it was before.
Now we have chaos, panic and opportunity. This will be hugely disruptive - however I do think we will get past this and the eventual loss of life hopefully not that much worse than a very bad flu season or two.