In another revelation that threatens to rock financial markets globally, Qwest Communications has admitted its financial results failed to correctly account for sales of its telecoms equipment in 1999, 2000 and 2001, the company revealed last night.
The US Securities and Exchange Commission (SEC) has now begun an investigation in April into those matters, an investigation that is continuing, Qwest confirmed.
Once the analysis of its accounting policies is completed by its new accountant, KPMG, Qwest will have to restate its financial results for the years under scrutiny – a process that may take some time, according to the statement.
Qwest has identified three main financial errors:
– Applying its accounting policies incorrectly with respect to certain optical-capacity asset-sale transactions in 1999, 2000 and 2001, with the disputed revenue totalling $1.16 billion.
– Incorrectly recording certain sales of equipment in 2000 and 2001 amounting to $283 million.
– Failing to properly account for certain expenses in a limited number of transactions incurred for telecoms services in 2000 and 2001. The company overstated costs by $15 million in 2000 and understated them by $113 million in 2001.
KPMG will be unable to sign off Qwest's second-quarter results – due next week – because of the ongoing uncertainty and continuing analysis of the company's figures for past years, according to the statement.
Qwest is withdrawing its financial guidance for the full year 2002 due to continuing weakness in the telecoms sector, and also to competitive pressure. It will issue a revised guidance along with its second-quarter results, on August 8.