Autonomy spurs questions on looming accounting overhaul

Wed Dec 12, 2012 1:11am EST
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By Dena Aubin

NEW YORK (Reuters) - The scandal at Autonomy, a UK software group bought last year by Hewlett-Packard Co, has some accountants wondering about the wisdom of new, global standards in the pipeline that would change how companies account for revenue.

"Revenue recognition" is the most common type of corporate book-cooking. The Autonomy scandal, though still murky, allegedly involves a great deal of overstated revenue, or how much money was coming into the company from customers.

That allegation has been leveled by HP, which said last month it overpaid for Autonomy and accused it of "serious accounting improprieties." Autonomy has rejected such allegations and said HP is looking for "scapegoats."

The dispute comes as accounting standard setters grapple with new standards for recognizing revenue. Some accountants fear these standards, set for completion by mid-2013, could mean a step backward in fighting accounting abuses.

The goal of the new, global approach is ambitious. If completed as planned, the standards would for the first time put companies in the United States and in more than 100 other countries under the same revenue accounting rules. Inconsistency on this is widespread now and often a source of disagreements.

But critics said the new standards would discard decades of detailed U.S. accounting rules in favor of broader, principles-based international norms. That, they said, would be a mistake.

"The U.S. system was replete with details, replete with examples, and replete with precedent," said Tom Selling, author of the Accounting Onion blog.

Throwing away that level of detail would give corporate managers more room to manipulate revenues and profits, he said.   Continued...

A HP Invent logo is pictured in front of Hewlett-Packard international offices in Meyrin near Geneva August 4, 2009. REUTERS/Denis Balibouse