SALOMON INC. blames a bookkeeping screw-up for helping
to produce its record 1994 net loss of $364 million. But details on how that happened are, well, skimpy.
Sanford C. Bernstein & Co. analyst Guy Moszkowski, however, fleshes out how embarrassingly lax Salomon's financial controls have been. A big boo-boo: Salomon's London office tracked assets in local currencies while recording liabilities in dollars. As the value of the greenback steadily declined in recent years, liabilities were reported in slowly shrinking dollar values, asset gains in rising local currencies. Both gains and losses should have been recorded in local currencies, Moszkowski says. The company says it fixed the problem, and Moszkowski believes the snafu won't be repeated.
Salomon says bookkeeping errors produced a huge charge that, on an aftertax basis, amounted to more than one-third of the 1994 loss. Trading setbacks, which hit the securities industry across the board, were the other large weakness.
Salomon says layoffs are next. "We are reviewing all business lines with the intent of reducing head count," says a spokesman for the firm.