Accounting & Tax

Rectifying International Accounting

Integrated-circuit maker may restate prior results to correct irregularities including premature revenue recognition.
Stephen TaubApril 9, 2007

International Rectifier, a manufacturer of integrated circuits used in power management systems, disclosed that an internal investigation has uncovered accounting irregularities at a foreign subsidiary.

The company added that it may restate prior results to correct the irregularities, which include premature revenue recognition, and warned investors to ignore its financial results for the past five quarters and the fiscal year ended June 30, 2006.

International Rectifier also disclosed that material weaknesses in the internal control over financial reporting exist at that foreign subsidiary.

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The company elaborated that until it had investigated further, it would be “unable to provide a reasonable estimate of the impact of the accounting errors on its financial statements [and] unable to predict the likelihood, amount or the timing of any possible restatement.”

International Rectifier, which added that it would not file its March quarterly results on time, also cancelled a May 11 meeting with analysts.

Last May, the company restated results for the first two quarters of fiscal 2006 to correct its cash flow statements regarding the classification of excess tax benefits generated from the exercise of stock options. The company also disclosed that controls and procedures were not effective in certain quarters due to a material weakness.