SEC enforcement officials have yet to reach any conclusions and could decide against bringing a case, said the people.
The issues involved are complex and there are few black-and-white rules governing how companies apply program accounting,
one person said.Program accounting has been around for decades.
It was first championed by the aerospace industry to address the problem that companies’ biggest expenses are amassed upfront, as they design planes and devise manufacturing processes. Costs typically fall as the assembly becomes more efficient, making it cheaper to build the later jets than the earlier ones.
The method, which is fully compliant with Generally Accepted Accounting Principles,
lets companies average out the costs and anticipated profits over the duration of the “program” for a specific jet, a period that can last decades and encompass hundreds or even thousands of aircraft.
The expected costs and sales are estimates and they must be updated -- and a loss recorded -- when the program is determined to have reached a point where earnings won’t catch up to losses.