comScore (SCOR) Anticipates Impacts of Misstatements

September 15, 2016 5:40 PM EDT

Find out which companies are about to raise their dividend well before the news hits the Street with StreetInsider.com's Dividend Insider Elite. Sign-up for a FREE trial here.

comScore (NASDAQ: SCOR) disclosed in an SEC filing:

Item 4.02 — Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review
As previously disclosed, on February 19, 2016 the Audit Committee (the “Audit Committee”) of the Board of Directors (the “Board”) of comScore, Inc. (the “Company”) received a message regarding certain potential accounting matters. In response, the Audit Committee immediately commenced an investigation of the matters with the assistance of King & Spalding LLP, as independent counsel to the Audit Committee, and AlixPartners, LLP, as forensic accountants.
As a result of issues identified thus far in that investigation, on September 12, 2016 the Audit Committee, in consultation with management, concluded that (i) the Company’s consolidated financial statements for the quarters ended September 30, 2015, June 30, 2015 and March 31, 2015 included in the Company’s Quarterly Reports on Form 10-Q, (ii) the Company’s consolidated financial statements for the years ended December 31, 2014 and 2013 included in the Company’s Annual Reports on Form 10-K (including the interim periods within those years) and (iii) the Company’s preliminary unaudited condensed consolidated financial statements for the quarters and year ended December 31, 2015 included as an exhibit to the Company’s Current Report on Form 8-K furnished on February 17, 2016, should no longer be relied upon due to the misstatements described below.
Management and the Audit Committee have discussed the matters disclosed in this report with the Company’s independent registered public accounting firm, Ernst & Young LLP.

Background
As a result of the February 19, 2016 message, the Audit Committee has been investigating the issues raised by the message and matters related to the Company’s revenue recognition practices, disclosures and internal controls. The investigation of the matters in the message is substantially complete and the Audit Committee identified areas of concern in the matters reviewed, including certain activities that reflect errors in judgment with respect to certain accounting practices and resulting disclosures as well as deficiencies in the Company’s internal control system. The transactions under review in the investigation principally relate to nonmonetary transactions. Management with input from accounting consultants has been analyzing these transactions, and as discussed below, management has concluded that these transactions have been recorded in error.
As the investigation concludes, the Company also will be undertaking a significant effort to help ensure that the errors in judgment and internal control deficiencies did not impact other transactions that were not part of the investigation. Therefore, there may be additional accounting adjustments as a result of these efforts and such adjustments may be material.
Based on the results of the Audit Committee investigation to date and management’s review, the Company cannot support the prior accounting for the nonmonetary transactions recorded by the Company during the years ended December 31, 2013, 2014 and 2015. As a result, the Company has concluded that revenue and expenses associated with all nonmonetary transactions during the periods identified above should be reversed and accounted for at historical cost rather than at fair value. There is no historical cost basis associated with the assets that the Company exchanged and therefore there should be no revenue recognized or expenses incurred for those transactions. While a nonmonetary transaction inherently has no effect on operating income or cash flow over the life of the relevant agreement governing such transaction, the timing of revenue recognized relative to the related expense recognized may have an effect on a periodic basis. As previously disclosed, the Company does not expect in the future to enter into any nonmonetary transactions that would result in the recognition of revenue.
Based on the results of the investigation to date, certain remediation actions have been recommended by the Audit Committee, with a view toward improved accounting and internal control practices. These recommendations include enhancing communications to support a robust control environment; strengthening controls around the Company’s revenue recognition practices; and enhancing the Company’s internal audit and compliance functions. The Company is committed to maintaining an effective control environment and making changes needed to enhance effectiveness.

Currently anticipated impacts of the misstatements
Based on the results of the investigation to date, the Company’s current preliminary estimate of errors discovered to date with respect to the nonmonetary transactions described above on previously reported revenues, expenses from operations, and operating income (loss) is as follows:
(Dollars in thousands)
Revenue
Total Expenses from Operations
(Loss) Income from Operations
Previously Reported
As Adjusted
Previously Reported
As Adjusted
Previously Reported
As Adjusted
Year Ended December 31, 2014
$
329,151
$
312,900
$
343,931
$
327,668
$
(14,780
)
$
(14,768
)
Year Ended December 31, 2013
$
286,860
$
283,615
$
283,767
$
281,971
$
3,093
$
1,644
(Dollars in thousands)
Revenue
Total Expenses from Operations
(Loss) Income from Operations
Previously Reported
As Adjusted
Previously Reported
As Adjusted
Previously Reported
As Adjusted
Quarter ended March 31, 2015(1)
$
87,329
$
83,532
$
96,519
$
92,348
$
(9,190
)
$
(8,816
)
Quarter ended June 30, 2015(1)
91,414
80,649
94,232
89,242
(2,818
)
(8,593
)
Quarter ended September 30, 2015(1)
92,405
83,310
90,162
85,032
2,243
(1,722
)
Quarter ended December 31, 2015(1)
97,669
92,362
90,554
84,030
7,115
8,332
Year Ended December 31, 2015(1)
$
368,817
$
339,853
$
371,467
$
350,652
$
(2,650
)
$
(10,799
)
(1) The Company previously filed unaudited interim consolidated financial statements for the quarters ended March 31, June 30 and September 30, 2015 and furnished preliminary unaudited financial results for the quarter and year ended December 31, 2015.
The reported amounts for 2015 and the as adjusted amounts for 2013, 2014 and 2015 described above related to the errors in nonmonetary transactions are preliminary, unaudited and subject to change.
The Company is working toward filing its restated consolidated financial statements as soon as practicable. At this time, however, the Company cannot predict with certainty when the preparation of those prior period restated financial statements, as well as any subsequently required Forms 10-Q and Forms 10-K including the Company’s financial statements, will be completed. The restated consolidated financial statements will reflect any additional accounting adjustments that arise as a result of the efforts described above.
The Company is committed to addressing the issues identified, and to re-establishing timely financial reporting as soon as practicable.


Serious News for Serious Traders! Try StreetInsider.com Premium Free!

You May Also Be Interested In






Related Categories

Corporate News, Guidance, Hot Guidance

Related Entities

Earnings

Add Your Comment