SEC probes RSA Security accounting practice

When do sales become revenues?

The Securities and Exchange Commission (SEC) has launched on investigation into accountancy practices at RSA Security.

In a statement issued last Friday, RSA said that the SEC was looking at how it disclosed a change in the way it recognised distributor revenues.

From Q1, 2001 revenues to distributors were accounted for on shipment rather than when disties sold security software onto the channel.

The SEC will investigate whether this change should have been have been disclosed in RSA's Q1 earnings press release as well as "certain trading in the company's securities".

RSA has stated that the investigation will not require any change to its financial statements. The firm said it intended to fully co-operate with the SEC in its enquiry.

Confirmation of the SEC investigation came after RSA announced Q4,2001 revenues were $63.0 million, compared to $78.1 million for the fourth quarter of 2000. RSA reported a net loss of $10.1 million for Q4 2001, compared to net income of $103.9 million for the fourth quarter of 2000.

Stocks in the company fell to $11.86 by close on Friday, down from $18 earlier last week. ®

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