CareFusion Takes Lease Accounting Question to SEC
Published September 6, 2012
Categories: Lease Accounting
Medical device maker CareFusion said in a news release it has notified the SEC that it will delay filing its annual report for the fiscal year ended June 30. CareFusion said it will use the extension to consult with the SEC about the company’s accounting policy for sales-type leases in its Pyxis medication and supply dispensing product line, a policy CareFusion has consistently applied for more than 10 years.
In connection with its year-end audit, the company said it was made aware of a potential alternative application of the accounting rules and thought it prudent to discuss the matter directly with the SEC prior to filing its Form 10-K.
The alternative application of GAAP being discussed with the SEC would have the effect of increasing the amount of revenue recorded at the inception of each lease and decreasing the amount of revenue recorded over the life of each lease. Accounting for leases in this way would likely result in a modest increase in cumulative revenue and earnings, while the impact on any particular fiscal year may vary. In addition, this would result in an increase in the company’s investment in sales-type leases on the balance sheet.
Compliance Week notes in a related story that during a conference call for investors and analysts, CareFusion CFO Jim Hinrichs said the issue did not arise as a result of a disagreement with auditors, and there’s been no significant change in audit personnel that might have led to discussion of an alternate approach. “We continue to believe our accounting for leases is in accordance with GAAP”, he said. “They (the auditors) concur with the position that we’ve presented to the SEC.” He offered no further insight into how or why auditors flagged the accounting.
To read the CareFusion news release click here.
To read the ComplianceWeek article click here.