Nortel Clarifies Restatement Review

Nortel provides clarification on announcement that it restate financial results

March 14, 2006

1 Min Read

TORONTO -- Nortel(x) Networks Corporation (NYSE/TSX: NT) issued a clarification of certain matters reported in the press relating to its announcement on March 10, 2006 concerning the need to restate certain prior period financial results. The Company wishes to clarify that Nortel's internal and external auditors have not undertaken an investigation as to whether any improper conduct may be associated with the need to effect the latest restatement.

The internal and external reviews referenced in the press related to an extensive contract review that was undertaken as part of remedial efforts relating to internal control deficiencies. As previously announced, the review related primarily to the Company's accounting for complex contractual arrangements under American Institute of Certified Public Accountants Statement of Position ("SOP") 81-1, "Accounting for Performance of Construction-Type and Certain Production-Type Contracts", and SOP 97-2, "Software Revenue Recognition". This work and other discussions with Nortel's independent auditors resulted in the determination that certain revenue recognized in prior periods should have been deferred and recognized in future periods for contracts involving multiple deliverable elements, including upon the delivery of undelivered elements such as hardware, software and/or services. While the Company has not become aware of any wrongdoing as a result of this extensive contract review, and none was apparent, this review was not focused on conduct matters. The Company will continue to examine this aspect.

Nortel Networks Ltd.

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