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IBM encounters accounting difficulties

Extraordinary? Or ordinary?

By Jon Bernstein

Published: 18 February 2002 07:23 GMT

Questions have been raised about IBM's accounting practices after it was discovered that the sale of a $340m (£237m) optical business unit was not declared an extraordinary item in the company's most recent set of results.

IBM shares fell $5 on Friday following the New York Times report.

According to the paper, such transactions would normally be included in extraordinary items within a firm's balance sheet. The fact this wasn't the case and the fact IBM offset the transaction against operating costs helped Big Blue meet its earning's forecasts.

An IBM spokeswoman said the company had done nothing wrong, pointing to the fact that CEO Louis Gerstner had mentioned the transaction during the company's conference call to discuss fourth quarter results. IBM had accounted in this way since 1994, the spokeswoman added.

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