Accounting & Tax

Maxtor Restates Results in its Favor

The restatement stems from a journal entry that "had been recorded in reverse." The company is looking into whether the blooper was the result of a...
Stephen TaubMay 25, 2005

Maxtor Corp. said it will restate its results for the quarter ending April 2—for the better. The restatement will push a previously reported loss downward, according to the data-storage provider.

The reason for the move was that the company’s accounting and finance staff discovered a data-entry error in its quarterly report relating to inventory and cost of goods sold, according to a Maxtor 8-K issued yesterday.

As a result of the error, in which a journal entry “had been recorded in reverse,” inventory was understated by $4 million, cost of goods sold was overstated by $4 million, and the net loss for the quarter was overstated by $4 million.

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Maxtor reported that it’s trying to find out whether the data-entry error stemmed from a material deficiency in the company’s internal control over financial reporting.

The company pointed out that in its 2004 annual report, management concluded that it did not keep effective internal control over Maxtor’s financial reporting as of December 25, 2004. The lapse in controls was the result of a material weakness linked to apply generally accepted accounting principles in “to complex, non-routine transactions in the financial reporting process,” according to Maxtor.