France’s AXA Group revealed a nasty surprise when it filed its consolidated financial statements with the COB, the French financial regulatory authority. Under U.S. GAAP accounting rules the group posted an overall 2.9 billion Euro ($3.1 billion) loss for 2002.
The company cautioned that the figure was unaudited, and thus subject to change, but when AXA originally announced preliminary estimates of its 2002 performance at the end of February it had indicated that it would suffer a $1.6 billion ($1.72 billion) loss under U.S. rules. AXA’s final audited U.S. GAAP results will be included in AXA’s Form 20F, to be filed with the SEC on or before June 30, 2003.
U.S. rules are more stringent on valuing investments than the rules applied in Europe. For instance “an equity security is subject to impairment review if its fair value has been at 80% or less of its net carrying value at year end, for a period of 6 months or more, and subject to specific qualitative factors affecting the industry or issuer,” said the bulletin. The rules forced AXA to write down the value of many of its investments by a larger amount than in France to satisfy the U.S. standards.
The U.S. also imposes different rules governing the valuation of deferred tax assets, investments in mutual funds and real estate companies, goodwill amortization and the treatment of the U.K.’s “with profit” insurance policies.
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