BlackBerry Ltd. agreed to stop adjusting its revenue, an issue highlighted by MarketWatch in the past, after receiving a letter of comment from the Securities and Exchange Commission questioning the practice.
The cybersecurity company BB,
previously best known for its eponymous and pioneering smartphone products, highlighted non-GAAP revenue, or revenue that does not conform to generally accepted accounting principles, in first quarter earnings launched in 2019 and subsequent periods, using a metric that the SEC does not allow, as MarketWatch wrote at the time.
The Waterloo, Ontario-based company explained the move in a footnote, in which it claims to have recorded “deferred software revenue acquired, but not recognized due to the $ 20 million business combination accounting rules, of which $ 19 million was included in the BlackBerry Cylance and $ 1 million was included in the IoT (Internet of Things). “
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In other words, I was adding revenue that GAAP would not allow as a result of an acquisition. This is important because the extra $ 20 million allowed the company to overcome FactSet’s consensus at the time, while its actual revenue number was a mistake.
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“Considering that their deferred income and commission expenses were adjusted to fair value at the time of acquisition in accordance with GAAP, these non-GAAP adjustments are intended to eliminate the impact of replacing purchase accounting and measurement methods individually adapted to GAAP, ”The SEC wrote in its comment letter to BlackBerry. Companies cannot use custom metrics when presenting financial results.
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BlackBerry responded that investors and financial analysts frequently seek information on deferred software revenue earned and deferred software commission expenses for modeling purposes. He also argued that others in his industry make similar adjustments, including companies he considers to be his peers.
But he also agreed to stop the practice and said that the adjustments “tend to zero due to the time that has elapsed since their acquisitions”. BlackBerry will no longer offer non-GAAP revenue numbers in its financial results reports, starting with its fiscal year from March 1 to February 28, 2022.
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BlackBerry shares fell 5.9% on Friday, but rose 40% in 2021, while the S&P 500 SPX,
earned 4%.
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