March 26, 2002, 1:23 PM — Microsoft Corp. said Tuesday that it filed amendments with the U.S. Securities and Exchange Commission (SEC) to correct a nearly US$1 billion "clerical error" in financial statements for 2001.
The Redmond, Washington-based company said that it misstated unearned revenue for the quarter ended Sept. 30, 2001 and the six months ended Dec. 31, 2001, which were formerly reported as $1.1 billion and $3.83 billion respectively. These numbers were corrected to state $2.07 billion in unearned revenue for the three months ended Sept. 30, 2001 and $4.79 billion in unearned revenue for the six months ended Dec. 31, 2001, the company said.
Unearned revenue is a common financial term for money received for a product or service that has yet to be fulfilled. This revenue sits on the books as a liability, until it has been earned.
Microsoft also amended its recognized unearned revenue for the two periods, claiming that the previously reported $914 million loss cited in recognized unearned revenue for the quarter ended Sept. 30, 2001 is now a loss of $1.879 billion and the $2.863 billion loss in recognized unearned revenue claimed for the last six months of 2001 has been corrected to a loss of $3.828 billion.
Recognized unearned revenue is the amount of revenue that has been earned so far on a long-term contract, according to a Microsoft spokeswoman.
Despite the egregious clerical errors, the company said that its net cash from operations and net change in cash and equivalents for the periods in question remain unaffected.
Microsoft's release of corrected earnings figures comes at a time when large companies are coming under heavy scrutiny over their accounting practices. The Microsoft spokeswoman denied that the amended numbers were a response to accounting pressures, however, restating that the changes were due to a clerical error.