here is item 4 of PEGA's filed document:
(iv) (1) To the Registrant's knowledge, during the Registrant's two most recent fiscal years ended December 31, 1996, there was no disagreement between the Registrant and E&Y on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which disagreement, if not resolved to the satisfaction of E&Y, would have caused it to make a reference to the subject matter of the disagreement in connection with its report.
During the interim period subsequent to December 31, 1996 and prior to October 30, 1997, there was no disagreement of the type described in the immediately preceding paragraph between the Registrant and E&Y, except for a disagreement which arose in late October 1997 concerning the Registrant's financial statements for the quarter ended June 30, 1997. The disagreement involves the appropriate accounting treatment for a series of transactions (the
"FDR Transactions") entered into by the Registrant with First Data Resources Inc. ("FDR") in June 1997. Contrary to the expectations of the Registrant based on its discussions with E&Y at the time the FDR Transactions were being negotiated, E&Y recently advised the Registrant that $5 million of software license revenue recognized by the Registrant in the quarter ended June 30, 1997 from one of the FDR Transactions should not have been recognized in that quarter. Accordingly, E&Y has advised the Registrant to restate its financial
statements for the three and six month periods ended June 30, 1997.
The Registrant is in the process of reviewing E&Y's position with
respect to the FDR Transactions and the impact of that position on the
Registrant's financial statements for the quarter ended June 30, 1997.
(2) The board of directors of the Registrant discussed the subject matter of the disagreement referenced above with E&Y.
(3) The Registrant has authorized E&Y to respond fully to the
inquiries of the successor accountant concerning the subject matter of the disagreement referenced above. The Registrant has not yet engaged a successor accountant.
And E+Y's response:
"we believe the conversations between Ernst & Young LLP and the Registrant, at the time the transaction referred to in its Form 8-K was being negotiated, did not provide a basis to conclude Ernst &
Young LLP had made any determination of the appropriate accounting for the transaction." |
