Corp Law Blog: Painful Lessons: Fannie Mae’s Press Release From Hell

"[A]s it was preparing its third quarter Form 10-Q, Fannie’s accounting staff discovered that their FAS 149 calculations understated the value of Fannie’s mortgage loan commitments by $1.3 billion, resulting in a $1.1 billion understatement of Fannie’s net worth. Fannie attributed this to "human error," explaining in a statement that: "There were honest mistakes made in a spreadsheet used in the implementation of a new accounting standard." On October 29, Fannie’s investor relations department alerted BusinessWire that it would soon be issuing a corrected version of its October 16 earnings release."

Mike O’Sullivan points out that $1.1B is not much in the context of Fannie Mae’s $1+T assets. Still, this is a reminder that many spreadsheets being bounced around companies contain errors.