Ericsson defends practices as report questions revenue accounting

STOCKHOLM (Reuters) – Swedish telecom equipment maker Ericsson defended its accounting practices after a newspaper questioned the way it booked future sales which had yet to be invoiced.

The company denied any wrongdoing and said in an emailed statement that “the claim that Ericsson in an inaccurate way has reported revenues in the income statement is not true”.

Ericsson referred to the annual report, which states that one of the conditions for reporting sales is when “collection is reasonably assured”.

Svenska Dagbladet, citing unnamed sources, reported that the way accounting has been used to report future sales could hit future earnings reports.

“When we have dug so deep into the future to be able to uphold ‘reported’ sales today, there is a big risk there will be a couple of totally ’empty’ quarters ahead,” an Ericsson source told Svenska Dagbladet.

The newspaper cited the sources as saying that most of the company’s long-term contracts had already been reported as sales.

Ericsson is expected to report a 15 percent drop in second-quarter operating profit on Tuesday. Shares in the company fell 4.3 percent to 63.70 Swedish crowns ($7.44).

(Reporting by Daniel Dickson and Olof Swahnberg, editing by Louise Heavens)