Japanese electronics giant NEC said it was unable to file its annual report from last year and would not be able to restate prior financial results going back to 2000 because of difficulties reconciling Japanese GAAP standards with U.S. GAAP standards.
The company had to restate its earnings three times last year and said earlier this year that it was switching to Japanese accounting standards. The company could face a delisting of its American depositary receipts from the Nasdaq as a result of the accounting troubles.
NEC is having trouble adapting to a U.S. GAAP standard called SOP 97-2 that requires vendor-specific evidence to support the recognition of revenue from certain types of software, maintenance and support services that were provided as part of multiple-element contracts.
That analysis had been necessary for NEC's outside auditor to complete the audit of NEC's consolidated financial statements for the fiscal year ended March 31, 2006 under Public Company Accounting Oversight Board standards.
The Nasdaq had granted NEC an extension until Sept. 25, 2007 to file its 20-F annual report for the fiscal year ending March 31, 2006. Now that NEC won't be able to file the annual report, the company said the Nasdaq may suspend trading of its ADRs. NEC also said that its previously filed U.S. GAAP financial statements going back to 2000 should no longer be relied on, but that its consolidated financial statements under Japan's GAAP standards remain current.
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