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Materiality Matters: Huntington Bancshares

 

Good piece on “materiality” – the decision issue of when something is important enough to make financial statements misleading – in this morning’s Wall Street Journal “Tracking The Numbers” column. [As always, subscription required.]

I’ve mentioned materiality on a few occasions recently, and I suspect we will be hearing more in the coming months as a result of remedies of already-discovered control weaknesses – and if the SEC issues new discussion/guidance on materiality and error corrections, we could see a lot more wrangling over materiality.

Materiality figures into the private investment trust International case, as the Wall Street Journal reminds us. But there’s a far less notorious case that stretched materiality beyond the limits of reasonableness. It involved Huntington Bancshares, earnings managed by selective ignorance or manipulation of accounting principles, Wall Street expectations, poorly-designed management incentives – and Staff Accounting Bulletin 99, “Materiality.” Not as much of a splashy story as AIG; it lacks the colourful character of a Hank Greenberg – also, Huntington’s market cap is about 1/26th of AIG’s. Besides, this one’s unravelled over the last couple years and there’s been plenty of other competing stories. Nevertheless, this one’s got all the ingredients of a Harvard Business …