The wildfire of accounting controversies engulfing Enron Corp. and tech-sector companies such as WorldCom Inc. is scorching another company Friday as Xerox Corp. announced that it would have to restate its 1997 to 2001 earnings due to accounting irregularities, a move that will reduce the company's pretax income over that period by US$1.4 billion.
As a result of the restatement, 1997 to 2001 revenue has been reduced by 2 per cent to $91 billion, the company said in a statement.
The company plans to file a new 10-K form with the US Securities and Exchange Commission (SEC) Friday, detailing the changes to the financial statements for the years in question, it said. The restatement comes in the wake of an audit ordered by the company of its books after a SEC investigation into the company's 1997 to 2000 earnings. The SEC investigation, which was settled in April, found that the company would have to restate its earnings from 1997 to 2000 by an estimated $3 billion.
$6 billion boost A report in Friday's Wall Street Journal quoting sources close to the situation said that an audit that included 2001 results could boost a total restatement of company financials since 1997 to more than $6 billion.
However, the Journal also reported that the revised revenue figure for 1997 to 2001 will likely appear to be less than $6 billion as most of the company's trouble came from booking revenue too early. Much of that revenue was realized by the company at later dates, the report said.
The adjustments made to its books will cause Xerox's 1997 to 1999 revenue and income to decrease while increasing 2000 and 2001 figures, the company said Friday. The company also reversed roughly $1.9 billion in revenue that had been previously booked and will apply that total to the company's statements starting in 2002.
In the 10-K expected to be released Friday, Xerox is reversing $6.4 billion in previously recorded equipment sale revenue for 1997 to 2001 and offsetting it with $5.1 billion in revenue that had been recognized as service, rental, document outsourcing and financing revenue for the same period, the company said.
Representatives of Xerox were not immediately available for comment on the Journal article.
Fine outlook The company has already paid the SEC a fine of $10 million as a settlement for its accounting troubles.
The Xerox news comes on the heels of Tuesday's announcement from struggling telecommunications company WorldCom that the company would have to restate its earnings for 2000 and the first quarter of 2001 due to accounting irregularities. The total restatement that WorldCom will need to make for that period will come close to $4 billion.
US President George W. Bush on Wednesday called WorldCom's announcement "outrageous" and promised that "we will fully investigate and hold people accountable for misleading not only shareholders, but employees, as well."