PracticeConsultingCA denies accounting ‘tricks’ allegation

CA denies accounting 'tricks' allegation

Business software maker Computer Associates (CA) is calling 'erroneous' a New York Times report which claims that the company used 'accounting tricks' to overstate sales figures.

On Sunday, the paper published an article questioning whether CA is reporting legitimate revenue and profit growth.

The practices were so widespread that employees joked that CA stood for Creative Accounting and that March, June, September and December, when fiscal quarters ended, had 35 days, giving the company extra time to close sales and book revenue, according to the article.

The paper also claimed that, as measured by standard accounting rules, CA sales have fallen almost two thirds over the last six months. To cover this, the company has begun presenting its financial results in a way that confuses even the Wall Street analysts who follow it.

In a conference call, CA officials defended their accounting practices. The company said that the New York Times report contained misleading and, at times, false information.

They said that CA has adopted a new means of licensing software, which resulted in a process that is ‘more conservative’ and provides for the greater predictability and transparency of financial results.

CA chief executive Sanjay Kumar said: ‘It is regrettable that this story fails to reflect the objectivity and balance by which this newspaper is generally known.’

Kumar added that the company’s new business model, which allows CA to account for revenues by short-term subscriptions instead of one-time licence fees, will not only benefit the company and customers but has been copied by competitors.

He said the company has already explained the new business plan and that using the pro forma, pro rata numbers is merely a better way to measure financial results against previous quarters booked under the old model.

Kumar explained that what the company is doing under the new business plan is changing the way it reports revenue, not making any changes to revenue. ‘We’re not perfect as a company,’ he said. ‘We continue to do things better and better.’

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