Financial Accounting Blog

Monday, January 19, 2004

Revenue Recognition. The New York Times[link no longer working] reports that Computer Associates is the subject of a Securities and Exchange Commission investigation into the software company's recent history of apparent improper accounting practices. [Update]
For two years, federal prosecutors and commission lawyers have investigated whether Computer Associates used accounting tactics to inflate its reported sales and profits in the late 1990's.

In October, Computer Associates said that an internal investigation by its audit committee had found that during its fiscal year ended in March 2000, it had recognized sales from contracts that had not yet been signed. As a result of the inquiry, the company forced Ira Zar, its chief financial officer, and two other executives in its finance department to resign.

But many former employees of Computer Associates have said that the company's accounting problems run far beyond backdating contracts in its 2000 fiscal year. The employees say that throughout the late 1990's, the company used a variety of accounting tactics to inflate its sales and profits and to convince Wall Street that it was growing as a result of new product sales instead of contracts it had acquired when it bought other companies.