Nick Smith
02-01-2006, 12:55 PM
A conservative estimate of shareholders´ value permanently destroyed in
Exxon Mobil’s Retained Income during 2005 may be between $4.7bn and $5.5bn.
This compares to the $4.5bn shareholder real value permanently destroyed in 2004.
This may amount to between 13.1% and 15.2% of the annual profit of $36.1bn.
The lower estimate would amount to real value destruction of $0.76 per share
compared to the total annual dividend of $1.14 per share.
In the last eight years from 1998 to 2005 a total of at least $23bn in real value
were permanently destroyed in Exxon Mobil’s Retained Income balance by the
implementation of the stable measuring unit assumption.
Exxon Mobil implements the Historical Cost Accounting model in accounting its
economic activities. The world´s largest energy producer value their variable
real value non-monetary items in terms of International Accounting Standards.
Retained Income is, however, a constant real value non-monetary item and
cannot be updated in terms of Historical Cost Accounting rules in a low
inflationary economy.
It is exactly the same as cash in a zero interest account.
If all Exxon Mobil’s activities had been conducted in a hyperinflationary
economy over these last eight years they could have updated Retained Income
in terms of International Accounting Standard IAS 29. The $23bn would not have
been permanently destroyed. They were not allowed to do this in a low inflationary
economy.
When Exxon Mobil carry on accounting their activities based on Historical Cost
Accounting for the next ten years the combination of low inflation and the
stable measuring unit assumption may permanently destroy an additional $50bn
in shareholders´ real value in their Retained Income. Their Retained Income
was $138.98bn as at the end of December 2004.
Retained Income may be declared as dividends to shareholders. Exxon Mobil´s
shareholders permanently lost $23bn over the last eight years. They will also
never receive that $50bn over the next ten years when their company´s
accounts are done based on the Historical Cost Accounting model.
Changing over to Real Value Accounting will stop the destruction of shareholder´s
real value in Exxon Mobil´s Retained Income and will gain the petrochemical giant´s
shareholders at least $50bn over the next ten years.
PricewaterhouseCoopers are Exxon Mobil´s independent auditors.
(Value date Dec 2005 US CPI 196.8 – All above values to be updated as the
US CPI changes every month.)
Exxon Mobil’s Retained Income during 2005 may be between $4.7bn and $5.5bn.
This compares to the $4.5bn shareholder real value permanently destroyed in 2004.
This may amount to between 13.1% and 15.2% of the annual profit of $36.1bn.
The lower estimate would amount to real value destruction of $0.76 per share
compared to the total annual dividend of $1.14 per share.
In the last eight years from 1998 to 2005 a total of at least $23bn in real value
were permanently destroyed in Exxon Mobil’s Retained Income balance by the
implementation of the stable measuring unit assumption.
Exxon Mobil implements the Historical Cost Accounting model in accounting its
economic activities. The world´s largest energy producer value their variable
real value non-monetary items in terms of International Accounting Standards.
Retained Income is, however, a constant real value non-monetary item and
cannot be updated in terms of Historical Cost Accounting rules in a low
inflationary economy.
It is exactly the same as cash in a zero interest account.
If all Exxon Mobil’s activities had been conducted in a hyperinflationary
economy over these last eight years they could have updated Retained Income
in terms of International Accounting Standard IAS 29. The $23bn would not have
been permanently destroyed. They were not allowed to do this in a low inflationary
economy.
When Exxon Mobil carry on accounting their activities based on Historical Cost
Accounting for the next ten years the combination of low inflation and the
stable measuring unit assumption may permanently destroy an additional $50bn
in shareholders´ real value in their Retained Income. Their Retained Income
was $138.98bn as at the end of December 2004.
Retained Income may be declared as dividends to shareholders. Exxon Mobil´s
shareholders permanently lost $23bn over the last eight years. They will also
never receive that $50bn over the next ten years when their company´s
accounts are done based on the Historical Cost Accounting model.
Changing over to Real Value Accounting will stop the destruction of shareholder´s
real value in Exxon Mobil´s Retained Income and will gain the petrochemical giant´s
shareholders at least $50bn over the next ten years.
PricewaterhouseCoopers are Exxon Mobil´s independent auditors.
(Value date Dec 2005 US CPI 196.8 – All above values to be updated as the
US CPI changes every month.)