Diebold to restate financial results following SEC probe
15 January 2008 | 1535 views | 0
Diebold, Incorporated (NYSE: DBD) announced today that it has concluded its discussions with the Office of the Chief Accountant (OCA) of the Securities and Exchange Commission (SEC) regarding the company's prior practice of recognizing certain revenue on a "bill and hold" basis and has established a revised revenue recognition method.
On October 2, 2007, the company announced it was discontinuing the use of bill and hold as a method of revenue recognition in both its North America and International businesses. Based upon further discussions with the OCA, Diebold has decided to change its revenue recognition policy. For revenue previously recognized on a bill and hold basis, the company will now recognize revenue upon customer acceptance of products at a customer location. Within the North America business segment, when the company is contractually responsible for installation, acceptance will be upon completion of the installation of all of the items at a job site and Diebold's demonstration that the items are in operable condition. In those instances when Diebold is not contractually responsible for the installation, the company will continue to recognize revenue upon shipment of the products to a customer location.
The company's revised method of recognizing revenue will be adopted immediately and comes after an in-depth analysis and review with its external auditors, the audit committee of the company's Board of Directors and the OCA. Following this in-depth analysis and review, the company has also concluded that its financial statements for the fiscal years ended December 31, 2006, 2005, 2004 and 2003; the quarterly data in each of the quarters for the years ended December 31, 2006 and 2005; and the quarter ended March 31, 2007 must be restated to reflect the company's revised accounting method and should no longer be relied upon. On January 14, the company discussed this conclusion with its audit committee. In addition, management's report on internal control over financial reporting contained in Form 10-K for the fiscal year ended December 31, 2006 should no longer be relied upon.
As noted above, revenue previously recognized under the company's prior bill and hold practice will be deferred until customer acceptance of the products at a customer location. This change should not, however, impact the timing of related billing and collection activity, and therefore is not expected to impact total cash flow from operating activities.
Once Diebold has reviewed the impact of this accounting change on its 2006 and 2007 revenue with its external auditors, it will provide updated revenue estimates for these periods. The company anticipates that the review of the impact of the accounting change will be completed by the end of January 2008.
On December 21, 2007, it was announced that as a result of the SEC's ongoing investigation, the company and its audit committee, in consultation with their outside advisors, have been reviewing other accounting items. While this review is not complete, any adjustments identified will be included in amendments to the company's financial statements. The company anticipates the review of other accounting items will be completed in the first quarter of 2008. After this review has been completed, Diebold will file, as soon as possible, the necessary amended financial statements. After filing these amendments, the company will then file its quarterly reports on Form 10-Q for the quarters ended June 30, 2007 and September 30, 2007 and its annual report on Form 10-K for the year ended December 31, 2007. While any amended financial statements will address all the issues identified in the review, the government investigations remain ongoing and there can be no assurance that the results of these investigations will not impact previously reported financial statements.
Prior to filing its amended financial statements, and as soon as is feasible following the completion of the review of the other accounting items, Diebold will also provide preliminary financial results for the second, third and fourth quarters of 2007.