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Xerox_Fraud - Xerox restates billions in revenue yet...

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SEARCH WSWS ON THE WSWS Donate to the WSWS! News Feed Contact the WSWS Editorial Board New Today News & Analysis Workers Struggles Arts Review History Science Polemics Philosophy Correspondence Archive About WSWS About the ICFI Help Books Online OTHER LANGUAGES German French Italian Russian Polish Czech Serbo - Croatian Spanish Portuguese Turkish Sinhala - Enter email address to receive news about the WSWS Add Remove n m l k j i n m l k j Submit English Search WSWS : News & Analysis : North America Xerox restates billions in revenue: yet another case of accounting fraud By Joseph Kay 1 July 2002 Use this version to print | Send this link by email | Email the author In the latest scandal involving a prominent American corporation, Xerox revealed last week that over the past five years it has improperly classified over $6 billion in revenue, leading to an overstatement of earnings by nearly $2 billion. The announcement of Xerox is not entirely new. The Securities and Exchange Commission (SEC) began an investigation that ended in April of this year. The SEC had charged the producer of copiers and related services with accounting manipulations. It was estimated at the time, however, that the amount involved was about half that which is now stated, or about $3 billion. A settlement was eventually reached that included a $10 million fine, as well as an agreement to conduct a further audit. It was this audit that produced the $6 billion figure. According to Paul Berger, the SEC’s associate director of enforcement, Friday’s announcement “falls under the scope of our original investigation .... We found what we considered to be a pattern of pervasive fraud.” There were two basic manipulations that formed the basis for the SEC investigation. The first was the so-called “cookie jar” method. This involved improperly storing revenue off the balance sheet and then releasing the stored funds at strategic times in order to boost lagging earnings for a particular quarter. This is a widely used manipulation. Earlier this year Microsoft settled an investigation by the SEC into similar practices at the software giant. The second method—and what accounted for the larger part of the fraudulent earnings—was the acceleration of revenue from short- term equipment rentals, which were improperly classified as long- term leases. The difference was significant because according to the Generally Accepted Accounting Principles (GAAP)—the standards by which a company’s books are supposed to be measured—the Page 1 of 4 Xerox restates billions in revenue: yet another case of accounting fraud 9/10/2006 http://www.wsws.org/articles/2002/jul2002/xero-j01.shtml
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