GM Estimates $200 Million Earnings Gain

General Motors Corp. says it has “substantially completed” an internal review of its tax accounting and now estimates its retained earnings will be $200 million higher than earlier reported.

That’s less than the $450 million-$600 million in increased retained earnings the company had estimated last month.

The gain, which includes results from an accounting review of General Motors Acceptance Corp., results from a discovery GM overstated its deferred tax liabilities by up to $1 billion due problems with its hedge accounting practices.

The newly surfaced accounting errors last month delayed the release of GM’s year-end earnings and prompted the auto maker to warn its financial statements from 2002 through the third quarter 2006 no longer were reliable.

GM’s former wholly owned financing arm, GMAC, also says it will restate its financial results from 2001 to the present because of problems with its accounting for interest-rate hedges. GM now controls a minority 49% stake in GMAC, following sale of a 51% share in December to a consortium led by Cerberus FIM Investors LLC.

In a financial update provided today, the auto maker says it plans to file its 10-K annual report by the March 1 deadline, but may seek an extension from the Securities and Exchange Commission to file by a March 16 deadline. The more recent review says the net impact of the tax adjustments means the company understated stockholder equity by $500 million since Dec. 31 2001.

GM is investigating deferred income taxes and its calculation of derivatives – two accounting issues it says led to the filing delays and could end in a cash windfall.

GM repeats its previous announcement that it does not expect the accounting restatements to impact on cash flow during the past five years.