Computer Sciences Corp. said it would restate its fiscal 2007 results after examining the impact of FASB Interpretation No. 48, or FIN 48, and discovering accounting errors for fiscal 1997 through 2007.
The company said the errors relate to CSC's accounting for income taxes and the effect of foreign currency exchange rate movements on some of its intracompany accounts. CSC said the corrections in accounting for income taxes could result in a cumulative charge of about $200 million. However, the corrections in accounting for foreign currency exchange rate movements could produce a material gain.
The company said its previously filed annual report for fiscal 2007 should not be relied upon and that it would issue a new annual report "as soon as practicable," followed shortly afterward by a report for the quarter ended June 29.
The Financial Accounting Standards Board's interpretation, FIN 48, "Accounting for Uncertainty in Income Taxes - an Interpretation of FASB Statement No. 109," has prompted a number of companies to reexamine their previous accounting statements since it took effect in January. The rule requires companies to say how much in dollar terms they have set aside in reserves in case their tax-saving strategies are found to be invalid.
FIN 48 has also produced fallout in the Senate. The Senate's Permanent Subcommittee on Investigations has sent letters to 30 companies asking for details of their previous tax arrangements, according to The Wall Street Journal and the BNA Daily Tax Report. Among the companies on the receiving end of the letters are Johnson & Johnson, Merck and Wyeth. The Senate investigators want to know about whether any foreign entities were used for tax shelters, and which tax professionals and law firms helped the companies set up the arrangements.
