Northrop to Boost ’89 Losses to Reflect $17-Million Fine

Northrop Corp. said Friday that it will increase its previously disclosed 1989 losses to include a $17-million criminal fine it agreed on Feb. 27 to pay in connection with a federal guilty plea.

Even though the fine was announced nearly two months after the close of 1989, Northrop said it would apply the charge to last year’s results because “the settlement arose from issues existing prior to the close of business on Dec. 31, 1989, and before the company completed and published its 1989 financial statement.”

Northrop is supposed to pay the fine by April 2 but has not yet done so, a company spokesman said. The Los Angeles-based aerospace contractor pleaded guilty to falsifying tests on two weapons systems.

Northrop originally reported an annual net loss of $63.5 million on Feb. 21. It will increase that loss to $80.5 million after inclusion of the fine.

The decision to post the $17-million charge against 1989 earnings reflects an accounting rule that requires financial statements to include as much information and be as accurate as possible, according to Hamilton Jenkins, a partner in the accounting firm of KPMG Peat Marwick.

“That’s done to protect investors,” Jenkins said. “Let’s say it wasn’t in the newspaper. Investors would have no way of knowing about it.”