Regulation

SEC Clears Cognos

The commission staff's review covered the way the company allocates revenue for postcontract customer support.
Stephen TaubJuly 21, 2006

A Securities and Exchange Commission review has found nothing objectionable in the revenue-recognition policies of Cognos Inc., the Ottawa, Canada-based software maker reported.

The review, done by the staff of the SEC’s Division of Corporation Finance, mainly covered the way Cognos allocates revenue for postcontract customer support in customer contracts having many moving parts, according to a regulatory filing by the company.

“We are pleased that the SEC staff has concluded its review,” Cognos president and chief executive officer Rob Ashe said in a company press release. In a later conference call, he told analysts that the company’s competitors had used the occasion of the review to “denigrate” its products and that the review had produced some delayed sales, according to Reuters. “I would say that on the whole, this SEC thing has been quite disruptive,” the CEO reportedly said.

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In May, Cognos reported that it would delay the filing of its annual report for the fiscal year ended February 28 because of the “ongoing review” by the SEC of the company’s revenue-recognition practices.

At the time, Piper Jaffray downgraded its rating on Cognos to “market perform” from “outperform.” In a published report, Piper Jaffray wrote: “We have no idea if there is a restatement coming, but given that most accounting reviews result in some type of accounting adjustment, we think it is prudent to lower our rating and wait until we get better visibility on the potential magnitude of the review and timeframe for completion.”