Ford is making some changes in its accounting department. The automaker said its 2016 net income will fall by $2 billion because of a change in the way it values pensions and retiree benefits.
Specifically, the automaker says it will now count pensions and other retiree obligations in the year they were incurred, instead of spreading them out over a number of years. Each year the pension loss will be reported as a special item “since it is not reflective of the underlying operating results of our automotive business.”
“On an after-tax basis, the remeasurement loss will reduce our full-year net income by about $2 billion in 2016,” Ford said in a document filed with the U.S. Securities and Exchange Commission.
The accounting change should not affect profit sharing for hourly workers represented by the United Auto Workers union because the formula is based on the automaker’s pretax profits in North America. Last year, workers received an average pretax profit-sharing check of $6,900.
Ford said the pension accounting change will not affect the company’s pretax profits.
Ford will report its year-end results on Thursday. The automaker still expects to meet its forecast of about $10.2 billion in pretax profits for 2016. The automaker does not release guidance for net income. It’s January sales numbers will be out on February 1.
Photo Credit: Ford