28 June 2002 Office equipment giant Xerox has admitted overstating revenues and profits for five years between 1997 and 2001 as a result of over-aggressive revenue recognition policies.
But while the company is restating $1.9 billion (€1.92bn) of revenues and $1.4 billion (€1.41bn) in pre-tax profits, the Wall Street Journal claims that the overstatement affects as much as $6 billion (€6.06bn) of revenues. Xerox’s restatement will cut cumulative revenues for the period by 2% to $91 billion (€92.2bn).
A restatement had been expected following an investigation by the Securities and Exchange Commission (SEC). This was concluded in April and resulted in a $10 million (€10.1m) fine for the company. The SEC had accused Xerox of “a wide ranging scheme to manipulate its earnings and enrich top executives”.
The restatement regards the early recognition of revenue from on-going equipment, service, rental and finance contracts. The $1.9 billion (€1.92bn) reduction in revenue for the period will instead be fed into the company’s revenues from fiscal 2002, as and when it is received.
Xerox was once at the leading edge of the technology industry. Many of the computer sector’s most important innovations were developed by Xerox at its Palo Alto Research Center (PARC). But it is famed for having failed to exploit such innovations as the computer mouse and the graphical user interface (GUI), both of which were developed at PARC.
