Despite the 1999 Securities and Exchange Commission guidance on materiality (SAB No. 99), companies continue to run afoul of the SEC disclosure rule by using an arbitrary threshold–usually 5 percent of revenues–as the basis for hiding transactions.

The latest materiality scheme involves troubled Qwest Communications International Inc., which is under SEC investigation for, among other things, questionable barter arrangements with now-bankrupt Global Crossing. In March, the SEC launched another–albeit informal–probe into revenue-recognition issues tied to Qwest Dex, the company’s directory business. Qwest maintains that the revenues amounted to 0.2 percent of total reported revenues, rendering the changes immaterial to its financial condition and unnecessary to report.

But since Dex is one of the businesses that Qwest might sell to raise cash to reduce debt, an accounting problem could have far greater ramifications than the small percentage of revenues indicates, notes credit analyst Carol Levenson, with Chicago-based research firm Gimme Credit. SAB 99 seems to corroborate Levenson’s point.