IN FULL: KPMG statement on Xerox

The KPMG statement:

KPMG has not yet seen Xerox Corporation’s 10-K filing with the Securities and Exchange Commission, although we have seen Xerox acknowledge in some media reports that there will be a reallocation of revenues in a further restatement. Our position remains consistent in the Xerox matter:

While this is an astonishing about-face on the part of Xerox’s management and PricewaterhouseCoopers, we are not aware of any facts that would change our previous conclusions – or the conclusions previously held by PwC and Xerox until Xerox announced its settlement with the SEC in April 2002. We continue to stand behind our audit work and our engagement teams.

KPMG remains firm in its conviction that the financial statementsreported on by us in May 2001, including Xerox’s financial statements for 2000 and the restated financial statements for 1997-1999, were fairly presented in accordance with generally accepted accounting principles.

KPMG, Xerox and PricewaterhouseCoopers had it right the first time, when the company and three separate teams from PwC all agreed with us that Xerox’s lease accounting methodology was GAAP compliant. By contrast, today’s news reports lead us to believe that the restated financial statements defy economic reality. They apparently give Xerox the benefit of recognizing revenues in 2002 and in future years that it had already recognized in prior years.

The remainder of the restatement appears simply to reallocate revenues among periods between 1997 to 2001. We cannot believe such an opportunistic restatement can well serve the interests of the investing public or to help reestablish confidence in the capital markets.

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