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El Paso Makes Positive Restatement of 2002 Results, Adjusts 2004 Financials

El Paso Corp. made a positive restatement of its 2002 financial results and adjusted its previously reported 2004 results last Monday after completing a review of the way in which it adopted several accounting standards in 2002 associated with investments in certain unconsolidated affiliates.

The company identified an error related to the manner in which it originally adopted the provisions of Statement of Financial Accounting Standards (SFAS) No. 141, Business Combinations, and SFAS No. 142, Goodwill and Other Intangible Assets in 2002. The error related to accounting for investments in unconsolidated affiliates acquired before July 1, 2001, where the fair value of the investments was greater than their original cost or acquisition price.

In 2002, El Paso wrote off what it believed to be unallocated negative goodwill totaling $154 million as a cumulative effect of accounting change. Upon further review, it determined that these amounts were not negative goodwill but rather amounts that should have been allocated to the long-lived assets of the underlying investments.

As a result, the company has restated its 2002 financial statements to reverse the cumulative effect amount of $154 million and further reflect the impact on unrealized losses and a related tax adjustment recorded on these investments in 2002. The change had no effect on the company's reported cash flows for any period.

However, the changes did impact El Paso's financial results for 2004. Instead of a $620 million net loss for the fourth quarter 2004 and a $1.024 billion net loss of the year, the revised data show a $544 million net loss for the quarter and a $948 million net loss for the year. El Paso's loss from continuing operations also was reduced to $548 million (86 cents/share) for the quarter and $802 million ($1.25/share) for the year from the previously reported $624 million (98 cents/share) for the quarter and $878 million ($1.37/share) for the year.

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