Summary
Williams Companies, Inc. (WMB) has issued a Form 8-K to announce that it will restate its previously issued financial statements for the year ended December 31, 2011. This restatement, to be filed via an amendment to its 10-K/A, concerns a correction to its noncurrent deferred income tax liability related to its investment in Williams Partners L.P. (WPZ). While the error was deemed material to the balance sheet and statement of equity, it has no impact on the company's consolidated statement of operations, cash flows, or previously announced earnings and dividend guidance. Management has confirmed no intention to dispose of its investment interest in WPZ, meaning the deferred tax liability would not become a current payable. The primary driver for this restatement is the accounting for deferred income taxes associated with "gains" recognized in equity from WPZ's unit issuances. The company previously did not record deferred taxes on these equity gains but has now concluded, in line with accounting standards, that such taxes should be recognized for future tax effects arising from the difference between its financial and tax bases in the WPZ investment. This accounting correction results in an increase to the noncurrent deferred income tax liability and a corresponding decrease to capital in excess of par value.
Key Highlights
- 1Williams Companies (WMB) will restate its 2011 financial statements due to a material error.
- 2The restatement involves accounting for deferred income taxes related to the investment in Williams Partners L.P. (WPZ).
- 3The error impacts the noncurrent deferred income tax liability and capital in excess of par value, but not the income statement or cash flow statement.
- 4Previously announced earnings, cash flows, and dividend guidance remain unaffected.
- 5Management has no intention to dispose of the investment interest in WPZ, mitigating the immediate tax impact of the deferred liability.
- 6A material weakness in internal controls over financial reporting was identified related to this specific accounting issue.
- 7The company is enhancing its tax accounting oversight for its WPZ investment to remediate the control weakness.