Accounting rules not to blame for HP-Autonomy writedowns, say readers

INTERNATIONAL accounting rules are not a reasonable excuse for why HP had to make billions of dollars of writedowns following its acquisition of Autonomy, according to Accountancy Age readers.

Of 65 readers polled, 77% believe the discrepancies between accounting standards do not explain the subsequent issues that came after the acquisition.

The remaining 23% agreed the mismatch between accounting standards did justify the writedowns.

Former Autonomy founder Dr Mike Lynch (pictured) and other former directors claim that HP failed to grasp the difference between US GAAP and IFRS – in that the international rules allow sales to resellers as bookable revenue, as opposed to whom the reseller sells onto, according to reports.

However, an HP spokesman said it was ‘patently ridiculous’ for the directors to claim that HP’s issue – that Autonomy allegedly falsely inflated sales figures through accounting – was in fact a misunderstanding.

There has been a long-running dispute between HP and Autonomy since the UK-based software company was purchased for $11.1bn (£6.7bn). The row escalated recently when HP slashed Autonomy’s previously published profit and revenue figures.

In restated accounts published on Companies House, HP has drastically revised the 2010 performance of Autonomy Systems Ltd, the UK group’s main operating subsidiary, and claimed to have uncovered “extensive errors (including misstatements)” in the previously issued financial statements.
In the original accounts, audited by Deloitte, Autonomy Systems reported profit of £105.7m and sales of £175.6m. In the restated version, turnover was revised down to £81.3m and profit was slashed to £19.6m.

According to the accounts, many of the errors relate to recognition of revenue and costs, as well as to the accounting for investments, and to correct the balance sheet for balances denominated in foreign currencies not re-valued at the year end.