The Securities and Exchange Commission has launched a formal investigation into an accounting change made by IBM in 2005.
Last April, IBM voluntarily made the change to start deducting the cost of employee stock options from its profits, an accounting rule that now applies to all U.S. companies. The SEC is concerned that the change may have been a way of disguising a lackluster first quarter.
In June, IBM announced that the SEC was conducting an informal investigation. By making a formal inquiry, the SEC has the power to subpoena documents, e-mails and testimony of individuals at the company. Spokesmen for IBM said that the company is fully complying with the agency.In 2003, the SEC began a formal inquiry into the way that IBM booked revenues in 2000 and 2001. A year earlier, the company had come under pressure for more transparent accounting when it emerged that it had sold a business close to the end of a quarter and used the proceeds to lower its costs.
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