Bausch & Lomb Inc. announced that it will delay the filing of its 2005 annual report by about six weeks because it has discovered a number of revenue recognition issues at several of its foreign subsidiaries.
The contact lens maker also found additional accounting problems.
In October, Bausch & Lomb fired the general manager and controller of its Brazilian subsidiary, BL Industria Otica Ltda. In December, the company announced a restatement covering 2000 through the second quarter of 2005 stemming from alleged improper conduct by managers at that subsidiary and from assessments by Brazilian tax authorities.
Also in December, Bausch & Lomb’s audit committee launched a probe into revenue recognition practices at BL Korea, a vision-care joint venture. Late last week, the company announced that from 2002 to 2005, BL Korea engaged in improper sales practices. It elaborated that all BL Korea vision care transactions for this period should be recorded under consignment accounting rules, which recognize revenue only upon payment by the customer.
Bausch & Lomb added that the Brazil and Korea investigations inspired it to look into practices at certain other foreign subsidiaries. As a result, it will also make revenue recognition adjustments relating to refractive-laser sales in certain foreign subsidiaries and for certain vision-care transactions with a distributor in Thailand.
The company also stated that work is continuing on expanded procedures with respect to assessing deferred-income-tax balance sheet accounts, which will result in additional adjustments in its expected restatement. In addition, Bausch & Lomb stated that it has not completed its assessment of its internal control over financial reporting and the control deficiencies identified to date in 2005.
In reaction, Bank of America analyst David Maris told clients, “The total financial impact to Bausch & Lomb has not been finally determined at this point, however we note the delay of SEC filings, delay in the completion of initial accounting investigations, and now disclosure of additional tax and revenue recognition are all events that we find concerning,” Reuters reported.