Time Warner Inc said on Thursday it will restate its financial results after an independent auditor found problems with the way it accounted for a number of transactions in 2000 and 2001, mainly involving online advertising.
The restatement came as part of a settlement with the US Securities and Exchange Commission which was announced in March of last year and required the company to pay a US$300 million penalty.
Under the agreement, Time Warner also agreed to appoint an independent examiner to review the historical accounting for several transactions, including three cable programming affiliation agreements that had online advertising components.
With that review now complete, the company will restate results going back to 2000. The examiner reviewed Time Warner's transactions with 17 other companies and found problems in the dealings with 15 of them, involving a total of US$584 million in revenue. The company didn't identify the counterparties in the transactions.
The auditor found that deals often involved AOL getting advertising commitments from the counterparties while also agreeing to buy products or services from them or make an investment in the other company, Time Warner said in a regulatory filing.
In addition to the revenue recognition, the independent examiner also found that Time Warner needed to adjust the cost of acquisitions that were made, and that some marketing expenses weren't recorded at the right time.
The final effect of the restatements will be to reduce the company's profits by about US$1 million in 2000 and US$161 million in 2001, while increasing its profits by about US$62 million in 2002, US$18 million in 2003, US$30 million in 2004 and US$16 million last year. For the first six months of this year, the restatement will raise its earnings by US$15 million.
The amounts are relatively small for a company of Time Warner's size. Time Warner posted profit of US$1 billion on revenue of US$10.7 billion for the second quarter.