Lots of 'goodwill' lost over those accounting changes

["Charles Jannuzi" <jannuzi@xxxxxxxxxxxxxxxxxxxxxxxxx>]

I wonder how many more companies will have to be more honest. Will the SEC
have to take them on one by one?

http://news.com.com/2100-1033-873388.html?tag=dd.ne.dht.nl-hed.0

Qwest under fire from SEC

    By Reuters
    April 2, 2002, 4:20 AM PT

    Qwest Communications International warned Monday that it may take a
charge of up
    to $30 billion because of accounting changes on goodwill, and said the
Securities and
    Exchange Commission staff recommended action against the telephone
company for
    excluding certain information from a January 2001 earnings report.

    The massive charge, which has been widely expected by Wall Street,
relates to the goodwill
    Qwest amassed through its $36 billion merger with local-telephone
company US West in 2000.
    Goodwill reflects the value of intangible assets, such as the value of a
brand name.

    Qwest, the No. 4 U.S. local-telephone company, said a required change in
accounting
    practices would reduce its goodwill by about $20 billion to $30 billion,
which was in line with
    Wall Street forecasts of about $25 billion. Qwest expects to record the
charge in the second
    quarter.

    The company also said it expects
    to make another "substantial"
    write-down in the value of its 47.5
    percent stake in international joint
    venture KPNQwest, whose stock
    has fallen 56 percent in the past
    three months. Qwest took a $3
    billion charge last year.

    Qwest Chairman Joseph Nacchio,
    who also serves as chairman of
    the KPNQwest board, said he
    would not stand for re-election on
    that board in order to better focus
    on Qwest's core business.

    Adjustments in finalizing Qwest's
    2001 results will increase its net
    loss by about 1 cent a share, the
    company said, adding that its 2001 net loss totaled $4 billion, or $2.41
a share.

    Shares of Qwest fell 22 cents, or 2.7 percent, to close at $8 on the
Nasdaq Monday. The stock
    has plunged 44 percent so far this year as the company struggled to
relieve a cash crunch,
    revive investor confidence and boost revenue growth.

    Possible action by SEC
    Qwest, already under SEC scrutiny for transactions in which it swapped
capacity on its
    fiber-optics network with other carriers, said the SEC was studying its
financial disclosures
    related to its acquisition of US West.

    The release at issue, which covered the fourth quarter and full year of
2000, excluded certain
    nonrecurring expense and income items related to the deal with US West.

    So-called pro forma results often exclude costs related to mergers,
unusual events or other
    items, and skate over accounting conventions codified in Generally
Accepted Accounting
    Principles, also known as GAAP.

    The SEC "staff has decided to recommend that the SEC authorize an action
against Qwest
    that would allege (that) Qwest should also have included in the earnings
release a statement of
    Qwest's GAAP earnings," Qwest said in its annual report filed with the
SEC.

    The securities regulators are also probing directory publication revenue
and sales of equipment.
    The company has said it would cooperate with the probe but denied
wrongdoing.

    Qwest said that the SEC had been looking at the use of pro forma results
by several
    companies and that any action against it would be "without merit."

    For 2000, the company reported that pro forma profits excluding one-time
items rose to $270
    million, or 16 cents a diluted share, compared with $188 million, or 11
cents a share, in 1999.

    The SEC has a pending informal investigation into Qwest's accounting
practices of
    contemporaneous network capacity sales, as well as its purchase of
assets from Global
    Crossing, now in bankruptcy protection.

    Deals on asset sales
    Qwest said it continued to weigh the sale of assets such as
local-telephone lines, its directory
    publishing business and wireless assets, but it did not expect any
imminent deals. The
    company also said it would close its Qwest Digital Media operations,
which produced, stored
    and transmitted digital video content.

    Separately, the company warned that the recession has led to a rise in
customers
    disconnecting service and a rise in accounts receivable and bad debt.

    "The company anticipates that the economic downturn in its local-service
area will be deeper
    and last longer than it had previously expected," Qwest said in the
annual report.

    Qwest is the primary local-telephone service provider in the Western
United States, and it also
    offers long-distance voice and data service in other parts of the
country.