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Accounting for Lawyers Keyed to Barrett
In the Matter of Caterpillar, Inc.
Citation:
Administrative Proceeding No. 3-7692, SEC Rel. No. 34-30532 (1992)Facts
In 1989, Caterpillar’s Brazilian subsidiary (CBSA) contributed $79 million to Caterpillar’s net profit, representing 23% of the company’s total earnings for that year. This was a dramatic increase from previous years and was primarily due to favorable economic conditions in Brazil, including high inflation and currency exchange rates. Caterpillar’s management was aware that these conditions were unstable and that CBSA’s contribution to earnings was likely unsustainable. Despite this knowledge, Caterpillar did not disclose in its annual report or MD&A the significance of CBSA’s contribution to earnings or the risks associated with Brazil’s economic conditions. In 1990, as anticipated by management, CBSA’s contribution to earnings decreased substantially, contributing to a 40% decline in Caterpillar’s overall earnings compared to the previous year.
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