AOL Time Warner Inc. (AOLTW) disclosed Wednesday that it is investigating three transactions in which it may have improperly accounted for revenue totalling about US$49 million.
Based on information it said it received in the last 10 days, AOLTW found three transactions involving its America Online Inc. division in which “consideration received by AOL from third parties may have been inappropriately recognized as advertising and commerce revenues,” according to a company statement.
The New York-based company said it reported to the U.S. Securities and Exchange Commission (SEC) that it had identified the three transactions in its Form 10-Q regulatory filing for the second quarter of 2002, submitted Wednesday.
The advertising and commerce revenue from the three deals amounted to about $49 million over a period of six quarters, and comprises an “insignificant portion” of the company’s total revenue for these periods, the statement said. However, the company plans to continue investigating these and other AOL transactions involving advertising and commerce revenue, the statement said.
The SEC and U.S. Department of Justice both have initiated investigations of AOLTW’s accounting practices. AOLTW said in a statement July 31 that it would cooperate fully with both investigations. [See, “AOL confirms DOJ accounting probe,” July 31.] The company’s finances came under a spotlight last month after the Washington Post ran a series of articles saying it had shifted revenue from one division to another in order to prop up the flailing AOL unit.
The disclosure came as AOLTW stated that Chief Executive Officer Richard Parsons and Chief Financial Officer Wayne Pace have certified the company’s financial reports in compliance with a recent SEC order and the recently passed Sarbanes-Oxley Act of 2002.
Also Wednesday, the company confirmed that David M. Colburn, head of AOL’s business affairs unit, left the company last Friday.