Exxon Mobil’s 2005 Shareholder Value Destruction Exceeds $4.7bn

Exxon Mobil, the world's biggest petroleum and petrochemical company, sets a new record in shareholder value destruction as a result of their accounting policies used in 2005.

Lisbon, Portugal (PRWEB) February 4, 2006 -- Shareholder value permanently destroyed in Exxon Mobil’s Retained Income during 2005 exceeded $4.7bn for the first time and may even have reached $5.5bn. This compares to the $4.5bn shareholder real value permanently destroyed in 2004 in this manner.

This amounts to between 13.1% and 15.2% of the recently announced 2005 annual profit of $36.1bn. The lower value would amount to real value destruction of $0.76 per share compared to the total annual dividend of $1.14 per share.

In the last eight years from 1998 to 2005 a total of at least $23bn in real value was permanently destroyed in Exxon Mobil’s Retained Income balance by the application of the stable measuring unit assumption.

Exxon Mobil implements the Historical Cost Accounting model in accounting its economic activities. The world’s largest energy producer values its variable real value non-monetary items in conformity with generally accepted accounting principles.

Retained Income is, however, a constant real value non-monetary item and cannot be updated in terms of Historical Cost Accounting rules in a low inflationary economy.

Retained Income is in essence the same as cash in a zero interest bank account under the Historical Cost Accounting model.

If all Exxon Mobil’s activities had been conducted in a hyperinflationary economy over these last eight years they could have updated Retained Income in terms of International Accounting Standard IAS 29 Financial Reporting in Hyperinflationary Economies. The $23bn would not have been permanently destroyed and in stead could have been paid out to shareholders in dividends.

They are not allowed to do this in a low inflationary economy in terms of Historical Cost Accounting rules.

If Exxon Mobil continue accounting their economic activities based on Historical Cost Accounting for the next ten years the combination of low inflation and the stable measuring unit assumption may permanently destroy an additional $50bn in their shareholders´ real value in their Retained Income. Their Retained Income was $138.98bn as at the end of December 2004.

Retained Income may be declared as dividends to shareholders. Exxon Mobil’s shareholders permanently lost $23bn over the last eight years. They may also never receive that $50bn over the next ten years when their company’s accounts are done based on the Historical Cost Accounting model.

Changing over to Real Value Accounting™ will stop the destruction of shareholder’s real value in Exxon Mobil’s Retained Income and may gain the petrochemical giant’s shareholders at least $50bn over the next ten years.

PricewaterhouseCoopers are Exxon Mobil’s independent auditors.

(Value date: Dec 2005 - US CPI 196,8. All the above values have to be updated as the US CPI changes every month.)

Contact
Nick Smith
RealValueAccounting.Com™
Tel +351 918386974
www.realvalueaccounting.com

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