Regulation

Acxiom’s Restatement Covers Four Years

Information-management provider details changes in accrued-revenue accounting, resulting in $8m less in earnings.
Roy Harris and Stephen TaubMay 21, 2008

Acxiom Corp. disclosed details of its previously announced plans to restate financials to correct errors in the company’s accounting for accrued revenue. The provider of customer and information management products said it is reducing earnings by $7.95 million over the past four fiscal years.

It also is reducing revenue by $12.83 million over the four-year period.

Last week, the company said that the restatement would lower net income by $2.4 million for 2006 and by $2.9 million in 2007.

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Acxiom also said that adjustments to its balance sheets would reduce accounts receivable by $56.5 million and $51.3 million as of Dec. 31, 2007 and as of the prior fiscal year’s end on March 31, 2007, respectively. It also will increase a deferred tax asset by $21.5 million and $19.5 million, and reduce shareholders’ equity by $35 million and $31.8 million, for the same periods.

Acxiom explained that historically it recorded accrued revenue for certain information services contracts based on a calculated estimate of relative value of performance for business that had occurred, but had not yet been recognized as revenue.

On May 14, the company said, it determined in consultation with its audit committee and board that the calculation that had been used for several years did not adequately support the accrual of revenue in accordance with Securities and Exchange Commission Staff Accounting Bulletin No. 104. “The company has concluded that the calculated estimates for the relevant periods cannot be relied upon, and the company is unable to objectively support recording accrued revenue for these information services transactions,” it stated in an SEC filing.

The company also said that it has determined that the restatement reflected a material weakness in the company’s internal control over financial reporting. Specifically, it said that policies and procedures to estimate performance completed for information-services contracts were not designed to provide sufficient support for the recognition of revenue under U.S. generally accepted accounting principles. As a result, it warned that management’s assessment of the effectiveness of internal control over financial reporting in the company’s annual report for fiscal year 2007 should no longer be relied upon.

Acxiom said it expects to complete its restatement and its fiscal 2008 consolidated financial statements and file its 2008 annual report by May 30.

The company has been a target of activist hedge fund ValueAct Capital, which owns more than 13 percent of its shares.

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