New $400m Accounts Query for AOL Time Warner

31 March 2003

AOL Time Warner faces further accusations by US regulators of improper accounting at its ailing online division.

As part of its ongoing investigation into the media mammoth, the Securities & Exchange Commission has queried two advertising deals involving America Online and German media mammoth Bertelsmann. The total value of these deals was $400 million (€368m; £254m), booked between Q1 2001 and Q4 2002.

Last year AOL admitted improperly booking revenues of $190m from various deals that amounted to little more than swapping cash [WAMN: 24-Oct-02].

The Bertelsmann agreements now under investigation are separate from these dubious pacts; instead they are linked to the purchase of the German group’s stake in AOL Europe.

The SEC contends that part of the income from the Bertelsmann deals should have been booked as a reduction in the acquisition price of AOL Europe rather than just as revenue.

AOL TW chief executive Richard Parsons, however, insists the accounts are accurate. “Based on the facts available to us,” he informed employees, “we both continue to believe the accounting was correct, and we have so advised the SEC.”

Although $400m is a drop in the ocean compared with AOL’s overall revenues ($41 billion last year), a restatement of the group’s earnings over the last two years, however small, would be a blow to Parsons’ attempts to restore credibility in the media giant.

Data sourced from: Financial Times; additional content by WARC staff