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AnonymousInactiveIKON May
Have Accounting Problems: Provides Preliminary Comments on Q2 Results
MALVERN,
Pa.–April 2005– IKON Office Solutions, the world’s largest independent channel
for document management systems and services, today announced that the company
will report preliminary financial results for the second quarter of fiscal 2005
on Thursday, April 28, 2005. The company also announced that it is conducting a
review of its billing controls and reserve practices for trade accounts
receivable, and that this review will not be completed by April 28.During an analysis of aged trade receivables conducted during the
quarter, and in connection with performing self-assessment and testing of its
internal controls over financial reporting under Section 404 of the
Sarbanes-Oxley Act of 2002, the company identified deficiencies in the processes
and timeliness by which it issues and adjusts certain invoices. The identified
deficiencies result from the centralization of billing centers and the migration
to a new billing platform and relate to the company’s U.S. trade accounts
receivable, and do not affect receivables arising under the company’s European,
Canadian and Mexican operations, receivables owing from General Electric Capital
Corporation (“GE”) under the Company’s leasing relationship with GE, or
receivables arising under its Legal Document Service and Business Document
Service businesses.In connection with these developments, management
has initiated a comprehensive review to determine the extent to which certain
trade receivables as of March 31, 2005 may be overstated due to billing errors
and insufficient reserves relating to aged receivables. Preliminary sample data
suggest that trade receivables as of March 31, 2005 may be overstated by an
estimated $45 million out of a total trade accounts receivables balance of $376
million. Total accounts receivable as of March 31, 2005 were $721 million.
Management believes that the estimated overstatement represents a cumulative
effect over multiple periods, but stressed that the estimate relates to the
company’s balance sheet as of March 31, 2005, and is based only on the sample
data assessed to date. As the company completes its detailed analysis, it will
assess the accuracy of the estimate, evaluate the impact on prior periods, and
determine the extent to which it will be required to restate results for any
prior periods. Any impact is expected to be recorded as a non-cash charge that
will not impact cash flow from operations. Due to the time and effort involved
in completing the required analysis, the company anticipates that it will need
to delay filing its Form 10-Q for the fiscal quarter ended March 31, 2005.Matthew J. Espe, IKON’s Chairman and Chief Executive Officer commented,
“We identified this issue and are acting quickly to fully resolve it. We are
committed to taking every step to fix not only the current issue, but also its
root causes so that we can remove any barriers to creating profitable growth
going forward.”
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AuthorApril 23, 2005 at 11:14 AM
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