Business Context and Reporting Period
This Form 8-K was filed by Diebold, Incorporated on January 9, 2008. The report addresses a significant change in the Company's revenue recognition policy following discussions with the SEC's Office of the Chief Accountant (OCA). The filing specifically concerns the discontinuation of "bill and hold" revenue recognition practices in the North America business segment and international businesses.
Key Financial Metrics
The filing does not provide specific numerical values for revenue, profit, cash flow, margins, debt, or liquidity. Instead, it announces a material accounting change requiring the restatement of historical financial data. Consequently, no current financial metrics are presented in this document.
Material Changes Versus Prior Period
The primary material change is the revision of the revenue recognition policy. Previously, the Company recognized revenue on a "bill and hold" basis. Under the new policy, revenue will be recognized upon customer acceptance of products at a customer location. For the North America segment, if the Company is responsible for installation, acceptance occurs upon completion of installation and demonstration of operable condition. If not responsible for installation, revenue is recognized upon shipment.
As a result of this policy change, the Company concluded that its financial statements for the following periods must be restated and can no longer be relied upon:
- Fiscal years ended December 31, 2006, 2005, 2004, and 2003.
- Quarterly data for the years ended December 31, 2006 and 2005.
- The quarter ended March 31, 2007.
- The management report on internal control over financial reporting contained in the Form 10-K for the fiscal year ended December 31, 2006.
Guidance, Outlook, and Risks
The Company is currently reviewing other accounting items as part of the SEC's ongoing investigation, announced on December 21, 2007. While this review is not complete, any adjustments identified will be included in amendments to the financial statements. The revised revenue recognition method was adopted immediately following review by KPMG LLP, the Audit Committee, and the OCA. The filing highlights the risk that previously issued financial statements are unreliable and subject to restatement.
Important Facts for Investor Verification
- Diebold must restate financial statements for fiscal years 2003 through 2006 and the first quarter of 2007.
- The "bill and hold" revenue recognition practice has been discontinued in favor of recognition upon customer acceptance or shipment.
- The management report on internal controls for the 2006 fiscal year is no longer reliable.
- An ongoing review of other accounting items is in progress, which may lead to further amendments.
- The filing does not contain updated financial figures; investors must await the restated filings for accurate data.