Computer Associates hits back at "creative accounting" allegations



Computer Associates (CA) has been defending its business model and accounting practices following accusations that it has been using "tricky" reporting methods...



Computer Associates (CA) has been defending its business model and accounting practices following accusations that it has been using "tricky" reporting methods to inflate its revenue.

An article in the New York Times last Sunday proved to be the final straw. It accused the enterprise systems management giant of misleading accounting practices. The article said former staff referred to the company as "Creative Accounting", and suggested CA changed its business model last year because it had run out of companies to acquire.

CW360.com reported last week on how CA changed the way it charged customers last year, supposedly to their benefit, but then saw its revenues for the fourth quarter soar.

Sanjay Kumar, chairman and chief executive said, "It is incumbent upon us to have a full and fair disclosure regarding the facts surrounding our business, our business model and the future of our business."

Kumar went on to say that the company changed its business model because the previous one was no longer sustainable. After emphasising how positive this was for the company, he also said it benefited customers who could now purchase software on a monthly basis, should they choose. He went on to point out that the company has changed the way it reports its results, not its revenues.

Kumar also said the company reported its fourth-quarter figures on a pro forma, pro rata basis, which has confused some analysts who remain cautious about the company's potential in the coming quarters.

"We have taken the bold and leading step to change our business model," Kumar said. "The model provides significant competitive advantage for CA."

CA has a troubled reputation with users having accused it of unfairly boosting software licensing fees, and with the financial community, particularly after last year's profits warning issued after markets had closed ahead of the fourth of July public holiday in the US.

Emma Nash

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