Anthony Menendez, who was Halliburton's director of technical accounting research and training, has accused the world's second-largest oilfield-services company of using so-called bill-and-hold accounting and other undisclosed practices to "distort the timing of billions of dollars in revenue." In short, Menendez says this allowed Halliburton to book product sales improperly, before they occurred.
The allegations are part of a 54-page complaint Menendez filed against Halliburton with a Labor Department administrative law judge in Covington, La., who released the records in response to a Freedom of Information Act request. Menendez, who resigned last year and is seeking unspecified damages, says Halliburton retaliated against him in violation of the Sarbanes-Oxley Act's whistle-blower provisions after he reported his concerns to the Securities and Exchange Commission and the company's audit committee.
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Here's how Menendez, who reported to Halliburton's chief accounting officer, summed up the bill-and-hold issue in his complaint:
"For example, the company recognizes revenue when the goods are parked in company warehouses, rather than delivered to the customer. Typically, these goods are not even assembled and ready for the customer. Furthermore, it is unknown as to when the goods will be ultimately assembled, tested, delivered to the customer and, finally, used by the company to perform the required oilfield services for the customer."
If true, that would violate generally accepted accounting principles. For companies to recognize revenue before delivery, "the risks of ownership must have passed to the buyer," the SEC's staff wrote in a 2003 accounting bulletin. There also "must be a fixed schedule for delivery of the goods," and the product "must be complete and ready for shipment," among other things.
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"The policy in the chart is clearly at odds with generally accepted accounting principles," says Charles Mulford, a Georgia Institute of Technology accounting professor, who reviewed the court records. "It's very clear cut. It's not gray."
Bill-and-hold was at the heart of Sunbeam Corp.'s collapse in the late '90s, and later blowups at Qwest Communications International Inc. and Nortel Networks Corp.
http://seattlepi.nwsource.com/opinion/320954_halliburton24.htmlCooking the books again Dicko....