Article Abstract:
The earnings reported by companies in the computer software industry will be affected by new accounting guidelines put out by the American Institute of Certified Public Accounts (AICPA). The proposed rules, which are directed only at publishers of software for mainframe computer systems, would no longer allow sales and services to be reported as revenue and profits until the products are actually delivered. Industry analysts predict that the affect on sales statistics could be to reduce them by three to 30 percent; profits may drop by seven to 15 percent. Industry observers believe, however, that the changes are good for the long run because a more realistic picture of a firm's finances and performance will result. BMC Software, Computer Associates International and Goal Systems International are expected to be hit hardest because they specialize in long-term maintenance contracts. The revenues from these can no longer be reported at the time the contract is signed but must be spread out over the term of the contract. The new rules do not apply to companies that develop software for microcomputers.
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Article Abstract:
MiniScribe Corp, a computer disk drive manufacturer, allegedly misled its accounting firm, Coopers and Lybrand, so that its 1986 financial report inflated its profits from an actual $12.2 million to $22.7 million, losing many of MiniScribe's bondholders over half for their investments. Bondholders have filed suits against MiniScribe's former chairman, its investment bank Hambrecht and Quist, and Coopers and Lybrand for malpractice. Malpractice suits are increasingly common as investors claim that auditors are protecting their clients at the investors' expense. Coopers denies complicity in the fraud, claiming it was deliberately misled and manipulated by MiniScribe, which was allowed access to its 1986 financial report to make some adjustments. Bondholders have been awarded over $550 million in damages, $200 million of which are Coopers' responsibility. Contention had arisen between Miniscribe and Coopers over the 1986 audit, much of which MiniScribe could not document. The Securities and Exchange Commission had investigated MiniScribe's sales reporting in 1987 but took no action.
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Article Abstract:
SAP AG's R/3 CIM software interconnects and organizes the daily operations of a business. The modular software changes the way a company operates and reduces the time and costs related to shipping products and handling inventory. Colgate-Palmolive began using R/3 in 1995 and plans to have all of its US operations on the network by the end of 1996. The company's international operations will tie into the network in 1997. R/3 implementation can be traumatic for employees, whose jobs may change or even become obsolete, and the transition frequently takes up to three years. Some industry analysts warn that R/3 is too complex, but advocates believe the user-friendly interface hides the complexities from users. Colgate is employing R/3 in virtually every aspect of its core operations and is linking its network to major customers and suppliers. The company will not say how much it has invested in the new system.
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