Tax preparation giant H&R Block Inc. has said in a filing with the Securities and Exchange Commission that it overstated net income for 2003 and 2004 by $91.1 million, due mostly to accounting errors.
According to the SEC filing, most of the revisions came from errors in the way H&R Block accounted for its acquisition of Olde Financial Corp., a discount brokerage business and online trading company that Block purchased in late 1999.
In June, the company announced that it would be restating its results for the 2003 and 2004 fiscal years, but its estimates of a cumulative 2-cent decrease in earnings per share were far off. In the filing, the company said that the anticipated change would be closer to a 50-cent decrease per share.
For 2003, Block's net income was reduced by $102.4 million to $477.6 million. In 2004, earnings rose by $11.4 million to $709.2 million.
Block's July 8 filing said that the bulk of the restatements would include corrections of two accounting errors, one resulting in a $12 million reduction in the provision for income taxes for the 2004 fiscal year and another erroneously calculating a gain on the sale of previously securitized residuals in the 2003 fiscal year, resulting in a net overstatement of revenue for that year of about $36 million. The correction of a calculation error related to incentive compensation accrual at Block's mortgage services division also decreased pretax income in the 2004 fiscal year by about $12 million. On an unrelated note, Block recently announced plans to acquire the Tax & Business Services division of American Express, creating a combined firm with more than 5,000 employees and generating more than $1 billion in annual revenue. Block will purchase the division for approximately $220 million and combine the business with subsidiary RSM McGladrey Business Services Inc.
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