8-KFinancial Events

WILLIAMS COMPANIES, INC. 8-K Report, Financial Restatement (May 1, 2012)

Filed May 1, 2012For Securities:WMB

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.

Frequently Asked Questions

Williams Companies is restating its 2011 financial statements to correct a material error in its accounting for noncurrent deferred income taxes related to its investment in Williams Partners L.P. (WPZ). Specifically, the company needs to recognize deferred income taxes on equity "gains" from WPZ unit issuances that were previously not accounted for.

No, the company explicitly states that this accounting correction has no impact on its Consolidated Statement of Operations, Consolidated Statement of Cash Flows, or previously announced earnings, cash flows, and dividend guidance. The change is primarily a balance sheet adjustment.

The restatement will result in an increase to the noncurrent deferred income tax liability and a corresponding decrease to capital in excess of par value for all periods presented. For the year ended December 31, 2011, this translates to an increase in total liabilities of $497 million and a decrease in total stockholders' equity of $497 million.

The company has indicated that this deferred income tax liability would only result in a current tax payable if Williams Companies were to dispose of its investment interest in Williams Partners L.P. (WPZ). Management has stated that it has no current intent to dispose of this investment, suggesting the tax liability is not an immediate cash concern.

Yes, the company identified a material weakness in its internal control over financial reporting related to the accounting for deferred income taxes associated with its WPZ investment. As a result, management has concluded that disclosure controls and procedures were not effective at a reasonable assurance level as of December 31, 2011.