Nortel Networks filed restated financial results for 2001, 2002 and the first nine months of 2003 with the U.S. Securities and Exchange Commission (SEC) on Monday, responding to an investigation of its book-keeping by U.S. and Canadian regulators that has cost 10 senior executives their jobs.
Since October, the company has been promising at regular intervals to file the restated figures, but kept postponing them as it uncovered further book-keeping problems.
The restated results show revenue for 2001 and 2002 to be US$1.93 billion higher than in earlier reports, with a corresponding reduction in losses. However, restated revenue for the following three quarters is lower than that previously reported, tipping the company into the red for that period. The extra revenue in 2001 and 2002 is deferred from previous years: Nortel has already restated its results for 1998, 1999 and 2000, reducing revenue reported for those three years by a total of US$3.38 billion. Most of that sum reappears in the accounts restated Monday, but around US$750 million has been deferred to years after 2003, and US$250 million has been permanently reversed, the company said.
The company restated its revenue for the first three quarters of 2003 as US$6.93 billion, a decrease of US$54 million on the previous report of US$6.98 billion. It restated net earnings for the nine-month period as a loss of US$94 million, down US$327 million from the net profit of US$233 million reported earlier.
For 2002, Nortel reported restated revenue of US$11 billion, an increase of US$439 million on the previously reported figure of US$10.57 billion. It also restated its net loss for that year as US$2.99 billion, a reduction of US$272 million from the previously reported loss of US$3.27 billion.
Restating its figures for 2001, Nortel reported revenue of US$18.9 billion, up US$1.49 billion from the previous report of US$17.41 billion. It restated its net loss for that year as US$25.72 billion, a decrease of US$1.43 billion from the previously reported loss of US$27.16 billion.
Nortel was forced to restate its accounts because an audit showed that it had broken SEC rules by recognizing revenue too soon, rather than deferring it until products had been delivered or risk of loss had passed. It had also incorrectly recognized revenue upon product delivery to a certain reseller, and made accounting errors related to non-cash incentives and concessions provided to customers, the company said.
The investigation has already cost the jobs of the company's former president and chief executive officer, its former chief financial officer, its former controller, and seven other senior finance employees. Each of these was aware, or ought to have been aware, that the company's book-keeping did not comply with U.S. generally accepted accounting principles, the company noted in its filing to the SEC.