Re Xerox: So, if they've reversed $5 billion of revenues ($3B in the Spring, $2B now) improperly accounted for and WCOM put $3.7B in the wrong bucket, why is WCOM a "fraud" and XRX is just an accounting disagreement? The SEC settles with XRX, but wants to kill WCOM? WCOM goes to zero and XRX drops a buck?
BTW, XRX's accounting error, IMO, is at least as inexcusable as WCOM's. Lease accounting is an area that should have been heavily scrutinized and where the rules are actually fairly clear-cut, though complex. The complexity, however, comes more from differences between GAAP and tax accounting, not from GAAP alone. The GAAP rules are pretty clear. Xerox took operating leases of equipment to customers and booked them as capital leases, allowing them to book sales revenue and a financial asset instead of keeping the equipment on their books and taking small bits of rental revenue each period. Doing so inflates both revenues and profits, and even makes their balance sheet look better.
The auditors, in reviewing XRX's customer financing business (or anyone else's), should be routinely checking this very issue.
Bob |
