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To: Elmer who wrote (167217)	6/28/2002 5:23:43 PM
From: wanna_bmw	Respond to of 186894

Experts: Xerox Accounting Woes Small Vs WorldCom's biz.yahoo.com By Ross Finley NEW YORK (Reuters) - Xerox is no WorldCom, and certainly not another Enron, accounting experts say. A $1.9 billion accounting change at Xerox Corp. (NYSE:XRX - News) pales next to WorldCom Inc.'s (NasdaqNM:WCOME - News) $3.85 billion debacle earlier this week and accounting experts said on Friday the office equipment maker's balance sheet ballet could actually help Xerox in the future. ADVERTISEMENT "They pushed the envelope, whereas I think WorldCom burned it," said Peter Knutson, professor emeritus of accounting at the Wharton School at the University of Pennsylvania. To be sure, experts said, Xerox, still synonymous in most Americans' minds with the word "photocopy," committed a financial sin by inflating past revenue. Stamford, Connecticut-based Xerox said on Friday that about $1.9 billion of revenue that was recognized over the past five years has been shifted to future results, beginning in 2002. Experts said that Xerox accounted for revenue from the sale of its copiers too aggressively, including that revenue in its earnings statements earlier than the Securities and Exchange Commission wanted. "It's really about shifting it around to be totally clean with the way the SEC was interpreting the accounting rules," said James Lundy, a vice president at research group Gartner. While investors had been expecting a restatement from Xerox for some time, Friday's move was larger than anticipated. The company said the restatement was primarily due to a change in the company's lease accounting in Latin America, under which revenues originally booked as sales-type leases -- agreements under which customers were contractually bound over time -- will now be recorded as rentals. But accounting experts said by shifting past revenues to the future, Xerox may have actually boosted its prospects by improving future cash flow. "In the case of WorldCom there is no improvement to be expected in the future. In the case of Xerox, the very violation that they committed in the past is an indicator of better performance in the future. So I consider this a lesser evil," said Itzhak Sharav, professor of accounting at the Columbia Business School. WorldCom, the No. 2 U.S. long-distance telephone and data services company, earlier this week shocked investors with news that accounting irregularities involving expenses misrecorded as capital expenditures had inflated its cash flow to the tune of nearly $4 billion. Otherwise, WorldCom said, it would have reported a net loss for 2001 and the first quarter of 2002. The irregularities included transfers between internal accounts of $3.06 billion in 2001 and $797 million in the first quarter of 2002. Those expenses should have been recorded on its income statement but were instead booked as capital expenditures, artificially boosting cash flow, the company said. "They've simply ignored past expenses and misstated them in order to create a higher income figure," Sharav said. "There is nothing in the future to collect for this." And while WorldCom's accounting shenanigans evoked the ire of President Bush, they did not match Enron Corp.'s (Other OTC:ENRNQ.PK - News) complex cloaking of massive liabilities in off-balance sheet transactions discovered last fall, experts said. "That is very, very serious business because that means future cash outflows," said Columbia Business School's Sharav. "I don't see anything comparable so far." wbmw