Where Did the $15.8 Billion Go?

For most of its history, HCA Holdings, was publicly traded. Then, in November 2006, it went private via Hercules Holding II LLC, an entity controlled by private-equity firms and Thomas F. Frist Jr, of HCA's founding family. After a reorganization and a new name, the company returned to the ranks of the publicly owned in March of this year, when it sold 88 million shares at $30 a pop. Perhaps more noteworthy than the stock's ups and downs, though, are some of HCA's bookkeeping practices. Of particular note is its use of the equivalent of pooling-of-interest accounting, which the Financial Accounting Standards Board put the kibosh on in 2001. While Hercules paid $20.9 billion for the hospital company's stock, HCA Holdings' financial statements account for the acquisition as if it had cost only $5.1 billion -- the value of shareholders' equity on the hospital company's books in September 2006. The missing $15.8 billion evaporated into a murky category that can be called unallocated costs.