GM's 'going concern' opinion does not mean much

Posted Mar 5th 2009 3:35PM by Douglas McIntyre
Filed under: General Motors (GM)

Anyone willing to take a long walk through the General Motors (NYSE: GM) 10-K, will find that the company got a "going concern" opinion from its auditors, Deloitte & Touche.

What the accounting letter says is, "The Corporation's recurring losses from operations, stockholders' deficit and inability to generate sufficient cash flow to meet its obligations and sustain its operations raise substantial doubt about its ability to continue as a going concern."

For those who don't spend time in the SEC archives, companies get these notes all the time. They have two weaknesses. The first is that the trouble that caused the opinion may have occurred months before the letter was issued. Since the auditor only looks at the "going concern" issue once a year, it often means very little.

The second problem with the letter is that, the minute a company which has received an adequate infusion of capital, the letter means nothing.

A "going concern" annotation for GM may make good headlines, but it does not mean a thing.

Douglas A. McIntyre is an editor at 24/7 Wall St.

Tags: 10-K, GM, inthenews