The shares of Boeing Co (NYSE:BA) are declining sharply due to the report that it is facing an investigation by the U.S. Securities and Exchange Commission (SEC).
The SEC is investigating whether Boeing properly accounted for the costs and expected sales of the 787 Dreamliner and the 747 Jumbo aircraft, according to Bloomberg based on information from people familiar with the matter.
Whistleblower filed complaint against Boeing
The report indicated that a whistleblower filed a complaint against Boeing, which prompted the Commission to launch an inquiry on the aerospace company. The investigation is focused in the long-term profitability of the 787 Dreamliner and the 747 Jumbo aircraft.
Both planes are considered among the most iconic from Boeing because of their technological advancements. The 787 Dreamliner and 747 Jumbo Jet are also well-known for the headaches encountered the company during the development process.
The whistleblower submitted internal documents and data about Boeing’s accounting method, according the people with knowledge about the situation. One person said the whistleblower first reported his concerns about the company more than a year ago.
The SEC is reviewing the financial reporting method called program accounting, which allows the company to spread the large and upfront manufacturing costs for the planes for many years.
The aerospace industry uses program accounting for decades. The SEC allows it because it is fully compliant with Generally Accepted Accounting Rule. However, some critics argue that the system provides companies like Boeing too much flexibility to fix earnings and hide potential losses.
Boeing spokesman Chaz Bickers and SEC spokesman John Nester declined to comment on the issue. Mr., Bickers told Bloomberg, “We typically do not comment on media inquiries of this nature.
The stock price of Boeing dropped more than 11% to $103.30 per share at the time of this writing around 12:57 in the afternoon in New York.
Over the past year, the aerospace company lost more than 29% of stock value. The company’s shares dropped from its highest trading price of $158.83 each to as low as $102.10 each.