SEC Announces Microsoft Settlement

The US Securities and Exchange Commission (SEC) revealed Friday that it has agreed to settle its accounting-practices case against Microsoft. The agency had launched an investigation to determine whether the company misled shareholders by understating earnings so that it could pad future, less lucrative, reporting periods. Microsoft won't need to admit any wrongdoing or pay a fine, but the company must permanently cease using the controversial accounting practice called smoothing, revenue deferral, or cookie-jar accounting (depending on which legal expert you ask).

"The commission and Microsoft entered into an agreement to settle the case," an SEC spokesperson said this weekend. "It's a cease-and-desist order. \[Microsoft has\] agreed not to do it in the future."

Microsoft declined to comment about the investigation or settlement but reiterated that it takes financial reporting "very seriously." Unlike the company's high-profile antitrust case, the SEC's financial-reporting investigation was private, with little news coverage. Nevertheless, the SEC is aggressive about pursuing any accounting irregularities at high-tech companies. Most such irregularities, however, involve companies overstating, not understating, their revenues.

For more information about the SEC investigation, see last week's WinInfo Daily UPDATE article, "Report: Microsoft, SEC in Financial Reporting Settlement."

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