Saturday, January 02, 2010

Now that's creative accounting...

Many kudos to the fine people at that caught this gem in the Chesapeake Energy financial reports. This transaction - the sale of art from the CEO to the Company was highlighted in their proxy...... What do you think, honey? Did the bill from their tax consultants exceeded the cost of the art?

In December 2008, the Company purchased an extensive collection of historical maps of the American Southwest from Mr. McClendon for $12.1 million, which represented his cost. A dealer who had assisted Mr. McClendon in acquiring this collection over a period of six years advised the Company that the replacement value of the collection in December 2008 exceeded the purchase price by more than $8 million. The maps have been displayed at the Company’s Oklahoma City headquarters for a number of years, during which the Company has been insuring the maps in exchange for their display. Our corporate headquarters in Oklahoma City is comprised of numerous buildings in a campus-type setting. These maps have been displayed throughout the Company’s headquarters for a number of years, complementing the interior design features of our campus buildings and contributing to our workplace culture. Our employees and visitors appreciate the maps’ depiction of the early years of the nation’s energy industry and the discovery and expansion of Indian Territory (now, Oklahoma) and the surrounding territories of the early United States. In addition, the collection connects to our Company’s everyday use of mapping in our business of exploring for and developing natural gas and oil. The Company was interested in continuing to have use of the map collection and believed it was not appropriate to continue to rely on cost-free loans of artwork from Mr. McClendon. The Board of Directors authorized the purchase of Mr. McClendon’s collection following review and approval by the Audit Committee.

As an aside, Chesapeake is a major producer of natural gas in the Marcellus Shale that reaches up into Central NYS.

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