Accounting & Tax

Nortel Adds Another “Re” to Restatement

The Canadian telecom giant will restate its results for at least the fourth time in the past four years.
Stephen TaubMarch 1, 2007

Nortel Networks disclosed Thursday that it will restate its financials for 2004, 2005, and the first nine months of 2006. For the Canadian telecom company, this is at least its fourth restatement in the past four years.

For 2006, revenues will increase about $24 million and net earnings will increase by $15 million; for 2005, revenues will decrease by about $28 million and net loss will increase about $87 million; and for 2004, revenues will decrease by about $33 million and net loss will increase by $42 million.

Nortel will also make adjustments to periods prior to 2004, primarily to correct third-party actuarial calculation errors in its North American pension and post-retirement plans and revenue incorrectly recognized in prior periods that should have been deferred to later periods. In total, revisions for periods prior to 2004 will decrease revenues by $27 million and decrease net earnings by $5 million.

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The company explained that it found these errors primarily through discussions with its pension actuaries and through its ongoing remediation efforts related to its previously reported internal control deficiencies. Nortel added that it has discussed these matters with the staff of the Securities and Exchange Commission.

“During 2006, we have implemented significant remedial measures and other actions to address our internal control weaknesses,” said executive vice president and chief financial officer Peter Currie, in a statement. “This has resulted in a substantial reduction of control weaknesses,” he added, “and represents a major milestone in our journey toward consistent, reliable, and timely financial reporting.”

For Currie himself, the final milestone is in sight; last month the finance chief announced that he will complete a difficult second tour of duty with Nortel by stepping down, effective April 30.