JDA Software (JDAS) to Restate Financial Statements After Audit Committe Finds Issues with Revenue Recognition


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April 10, 2012 5:44 PM EDT Send to a Friend
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Price: $45.18 --0%

Overall Analyst Rating:
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Revenue Growth %: -4.1%
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JDA® Software Group, Inc. (NASDAQ: JDAS) today announced that based on the ongoing review of its revenue recognition policies and the application of these policies during the fiscal years 2008 to 2011, the Audit Committee of the Company’s Board of Directors has made a determination that the Company’s annual and quarterly results within such fiscal periods should be restated. As a result, the Company’s previously issued financial statements for its fiscal years ended December 31, 2008, 2009 and 2010 and the related independent auditor’s report, along with the financial statements for the interim periods ended March, June and September 2011 and the interim periods in the fiscal years ended December 31, 2008, 2009 and 2010 should no longer be relied upon.

The Company anticipates making adjustments in the following area:
  • Software license revenue for certain transactions linked to associated services agreements should have been recognized when the services agreements were signed, as opposed to at the time that the license agreement was signed. Accordingly, the license revenue will generally be deferred from the quarter originally recognized, into the immediately subsequent quarter, when the services agreement was signed.
Additionally, the Company is continuing to evaluate the following areas:
  • Certain software license contracts recorded in 2009 and 2010 that included a clause protecting customers from discontinued products are being re-evaluated to determine if that language implies a future deliverable. If this determination is made, the Company would generally be required to recognize the revenue associated with these contracts over the initial term of the maintenance contract, which is typically a three year period, instead of up front, as originally recorded.
  • Vendor Specific Objective Evidence (“VSOE”) for Cloud Services in 2008 through 2010 is being re-evaluated to determine if the Company has met the appropriate requirements to recognize associated license revenue up front. If it is determined that these requirements were not met, the license revenue would be recognized over a period of up to three years.
Based on the review to date and these expected revenue adjustments, JDA anticipates the following regarding the restatement of its financial statements:
  • The Company continues to believe that the restatement will change the time period during which revenue was recognized, as opposed to the existence of the reported revenue.
  • Neither reported cash flow from operations nor reported cash balances are consequently expected to be impacted.
  • As a result of the Company’s decision to restate its financial statements, it also expects to record miscellaneous adjustments that were identified in prior periods, but not recorded due to the items being immaterial.
To date, the Company has not identified any instances of intentional wrongdoing, and is continuing to cooperate with the Corporation Finance and Enforcement divisions of the U.S. SEC as work continues.

The Company continues to perform its review in order to conclude and quantify the impact. Additionally, the Company is continuing to evaluate its internal controls over financial reporting. The Company expects to complete this process and file its restated financial statements over the course of the next few months. The Company does not expect to timely file its Form 10-Q for the quarter ended March 31, 2012 by the May 9, 2012 deadline. Subject to the completion of the audit of the restated financial statements by its independent auditors and the SEC’s ongoing inquiry, the Company expects to be timely with its filings by the August deadline for filing the second quarter Form 10-Q.

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