Out of curiosity I did some AI based research to see how and when a company must account for severence expenses under GAAP, taking into consideration 60 day notice periods, and basically they can incur the expense when they notify you so long as their is little chance of a reversal. additionally. if they have already made their lists for the first part of 2026 (q1/2) and are certain those positions are going away they can take the expense earlier such as in the $612MM hit we took this past quarter. So while severance expenses are expected to be lower by $700MM in 2026, part of the reason they can say that is that layoffs happening in the next few months are already paid for.
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it was bad decision to hire full time on all positions in Risk in past 4 years. Wachovia use to hire contractors for many roles and let them go after the work is done. They might do something on this severance .
Yes, the q1 2026 layoffs were known in q4 2025 and they booked an accrual for it. All companies do this.
@a1 setting up a reserve would be planning ahead. One thing I learned at WF -- they never plan ahead.
Bought and paid for.
@a5 exactly, that's the cap for 2026 I believe. We've been instructed that no more severance dollars are available this year. Either wait until 2027 or find other methods (which is a scary way to put it)
we were all wondering what the lying machine had to say about this
it is an accrual. They have a certainty of the expense so they need to recognize the hit to profits. It was definately for upcoming layoffs so the good thing to hear is that severance will be paid. Now i am sure they will leverage firing for cause also but that takes longer
I would think the amount to book as a reserve against future expense is done without consideration of individuals explicitly. Then when the individual gets displaced there’s an expense against a prior-established reserve account. But the expense hitting the income statement was in ‘25. Like loan loss provisions? So the individual exiting stage left is expense neutral from an I/S perspective.
I am not an accountant and thank god have no reason to be versed in this stuff. But I’m trying to suggest how you could habe ‘25 expense for ‘26 severance events?
I’ll get corrected here…