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Lucent to take $1.3B gain
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January 8, 1999: 8:21 a.m. ET
Change in 1Q from 12 years of tight accounting will add $170M to net
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NEW YORK (CNNfn) - Lucent Technologies says it will loosen its conservative accounting practices to bring them in line with most other companies, resulting in a one-time gain of $1.3 billion for its fiscal first quarter, ended Dec. 31.
The Murray Hill, N.J.-based telecommunications equipment maker says the 97 cents a share gain reflects the cumulative effect of the accounting change from 1986, when the company was part of AT&T (T), through the fiscal year that ended last Sept. 30.
Lucent (LU) also says the accounting change, and the adoption of new retirement provisions, will result in about $170 million in additional net income for fiscal 1999.
"Lucent's accounting practices will now be more in line with those of most major U.S. corporations," says company chief financial officer Donald Peterson. "Lucent's method of valuing pension and benefit assets had been among the most conservative of the more than 150 large U.S. corporations surveyed by our auditors PricewaterhouseCoopers."
"Our outside auditors agree this change is preferable," Peterson says.
The company says it had set the market-related value of its benefit plan assets by recognizing interest and dividends immediately while deferring and amortizing capital gains and losses. It says this more conservative approach, coupled with the strong performance of benefit trust investments, had resulted in a widening gap between the market-related and actual fair-market value of the benefit assets.
Now, the company will include an amount for assumed capital gains and losses when calculating market-related value, making it closer to the fair-market value of the benefit plan assets.
"This accounting change in no way affects the actual value or security of our pension or post-retirement assets," says Peterson. "No cash will leave the plan or flow back to Lucent as a result of this change."
Lucent shares closed Thursday at 116-1/2, down 11/16. 
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Lucent Technologies
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