AOL's much publicized creative accounting in the run-up to its merger with Time Warner has compelled the latter to set aside $3 billion (€2.43bn; £1.68bn) in respect of anticipated compensation to shareholders who lost megabucks after the duo's disastrous marriage in January 2001.

The massive provision has plunged the media titan into its first loss in three years. Topping the payout queue is a proposed settlement of $2.4bn which - subject to court approval - will be paid to a multi-shareholder class action against the company.

According to TW chairman/ceo Richard D Parsons, the proposed settlements are "important steps toward putting these matters behind us."

The media titan has already paid $300 million to the Securities and Exchange Commission to settle civil accounting fraud charges, plus a further $210 million in respect of a Justice Department investigation.

Parsons also revealed that the company has authorized a $5 billion stock repurchase program over the next two years, designed to increase the value of its shares.

Meantime, in the second quarter of 2005 TW lost $321 million, mainly attributable to the anticipated settlements. In the same period last year the company earned $777m.

Q2 revenues declined 1% to $10.7 billion. Shortfalls in income by the AOL and filmed entertainment divisions were largely offset by gains in the company's cable business, which earned $2.4 billion during the quarter, up from $2.1 billion.

Subscriptions increased for high-speed data, digital phone and new services such as digital video recording.

Data sourced from Washington Post Online; additional content by WARC staff