Computer Sciences Finds “Significant” Tax Errors

The problem involves income taxes linked to certain prior-period transactions.
Stephen TaubMay 31, 2007

Computer Sciences Corp. said it discovered “significant errors” in its accounting for tax liabilities in fiscal years 2000 through 2006.

Correcting the errors, as well as less significant slip-ups, will result in a total charge of $300 million to $400 million through March 31, 2006. The amount doesn’t include the $60 million or so in after-tax charges the company took through the same period as a result of its previously disclosed internal probe of stock option grants dating back to 1996. Currently expecting to file by June 13, the company plans to restate prior periods in its annual report for the year ended March 30, 2007.

Last week, Computer Sciences announced that it would delay its fourth quarter and fiscal year-end 2007 earnings announcement and conference call to buy added time to finalize the accounting for income taxes related to certain prior-period transactions. Three days later, the company said Van B. Honeycutt resigned as Chief Executive Officer.

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The company reported that Honeycutt will resign as an employee and as board chairman on July 30 and then serve as a consultant to Computer Sciences for one year. He was replaced as CEO by Michael Laphen, who had been president, chief operating officer and a director.