Sunday, 8 March 2009

The Curse of NHS Again

IBA Health
Let’s have a look at recognition of revenue which is always a ‘sensitive’ issue for IT Services or Software companies. IBA Health’s results statement says; “The National Programme for IT contract in the UK is a product delivery arrangement with a phased release of functionality enhancements over the period of the arrangement. Any licence revenue is recognised as the elements of the product are delivered. Implementation and service revenues are recognised upon the provision of those services.” It seems that the ‘product delivery arrangement’ is one in which licence revenue is recognised as elements of the product are delivered? This indicates that IBA Health’s revenue growth as claimed in the results is in part based on revenue for which no invoice has been raised, or the product is actually paid for, i.e. IBA Health has the money in the bank. Just how much of the claimed revenue is actually in this category is difficult to see. One can also see from: Notes to the FinStats no 8 (p58) and no 9 (p59) there is $35.4m of Past due receivables, and $58.7m of Accrued Revenue (ie not yet invoiced).
All this lack of clarity always worries and as clarity of results should benefit all parties surely it should be more clearly reported in the results? Until they are more searching questions are necessary.

Here is more detail on CSC’s restated results for FY97 to FY07 which caused announcements of results throughout 2008 to be continually late - as referred to in a previous post. Apparently the restatements are in the light of the FASB Interpretation 48 re Uncertainty in Income Taxes. The restatement coincided with an IRS investigation of CSC's US tax returns. The investigation concluded: “Under the settlement, which is evidenced by a Form 906 representing final resolution, CSC and the IRS have agreed to certain adjustments, the collective effect of which include a net operating loss carryover, research and foreign tax credits and charitable contribution carryovers, and other adjustments relating to amortization and depreciation deductions. The company will not be subject to penalties from matters covered by the settlement.” See the full text of the announcement on CSC’s web site here: . Perhaps it is this complex tax and statement situation which has led CSC to make some significant assignments within its Investor Relations department.
It is strange though that few if any other major US corporations seem to have had to restate earnings to this degree.

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