Dell Details Accounting Woes

NEW YORK -- In long-delayed financial statements that filed with the Securities and Exchange Commission, Dell Inc. on Tuesday shed light on its recent accounting irregularities, indicating that one of the biggest problems concerned how the personal computer company accounted for software sales, The Wall Street Journal reported Wednesday.

The new filings suggest that one of the biggest problems uncovered in an internal investigation i was the way Dell recognized revenue on certain software products it sells. Dell, a large reseller of other companies' software products, said it historically recognized revenue from software licenses at the time the products were sold, while deferring some revenue associated with support, the paper reported.

The Round Rock, Texas, company said in its filings that based on its internal review, it should have deferred the recognition of more revenue from software sales. In its restated financial statement for fiscal 2005, Dell deducted $105 million from software revenue because of the issues, the paper reported.

Another issue was product warranties. In some cases, Dell said it improperly recognized revenue associated with warranties over a shorter period of time than the duration of the contract, according to the filings. The company added in the filings that there were also instances where warranty reserves posted on its income statement were larger than the estimated liability of the warranty, and that such reserves weren't accounted for appropriately to the income statement, the paper reported.

Dell also incorrectly accounted for funding from its vendors, the company disclosed. According to the SEC filings, the company found that certain amounts received from vendors were incorrectly recorded as a reduction in operating expenses instead of a reduction in cost of goods sold, the paper reported.

-- NYSSCPA.org News Staff

Posted on 10/31/07