BusinessCorporate FinanceCA digs deeper into financial scandal

CA digs deeper into financial scandal

Further revenue restatements for 2000 to 2005

Computer Associates has been forced to further restate its revenues for 2000 to 2005, opening the latest chapter in its financial accounting scandal.

Link: Former CA chief charged with securities fraud

The company admitted in a newly published filing with the Securities and Exchange Commission (SEC) that a further review of its accounts for the period reveals that it wrongly booked deals as revenue that should have been booked as barters.

‘These transactions appear not to have been negotiated on an arm’s-length basis and to have no valid commercial purpose,’ the filing stated.

CA also identified some deals that required it to reach certain targets. Those revenues should not have been booked until those target dates, CA said.

The company expects to reduce recorded sales from 2000 to 2004 by $95m (£52m) to $125m. The restatement will add $7m-$10m to 2005’s revenues.

Senior managers who were responsible have since left the company, the filing said.

CA fired chief executive Sanjay Kumar in June 2004. He has since been charged with securities fraud and obstruction of justice. The vendor hired former IBM executive John Swainson as his replacement.

Kumar was closely associated with CA founder Charles Wang, who retired in 2002 amid increasing calls for a management overhaul within the company.

The SEC said last September that CA had prematurely booked more than $3.3bn in revenue from 1998 to 2000.

Michael Dortch, principal analyst with the Robert Frances Group, told Accountancy Age sister website vnunet.com that, although the latest restatement adds yet another chapter to CA’s ongoing bookkeeping scandal, it will not have much of an impact on how users view the company.

‘If the transactions had been more recent, it would have been more damaging. Given that they relate to 2000 and 2001, most customers will look at this as the final stages of house cleaning,’ he said.

The filing coincided with the publication of financial results for the quarter ending 31 March. CA reported $910m in revenues, up seven per cent over last year, but profit fell 81 per cent to $17m.

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