Investigations and Out of Period Adjustments
Summary of Audit Committee and SEC Investigations Related to the Out of Period Adjustments
As previously disclosed in fiscal 2012 and fiscal 2011, the Company initiated an investigation into out of period adjustments resulting from certain accounting errors in our Managed Services Sector (MSS) segment, primarily involving accounting irregularities in the Nordic region. Initially, the investigation was conducted by Company personnel, but outside Company counsel and forensic accountants retained by such counsel later assisted in the Company's investigation. On January 28, 2011, the Company was notified by the SEC's Division of Enforcement that it had commenced a formal civil investigation relating to these matters, which investigation has been expanded to other matters subsequently identified by the SEC, including matters specified in subpoenas issued to the Company from time to time by the SEC's Division of Enforcement as well as matters under investigation by the Audit Committee, as further described below. The Company is cooperating in the SEC's investigation.
On May 2, 2011, the Audit Committee commenced an independent investigation into the matters relating to the MSS segment and the Nordic region, matters identified by subpoenas issued by the SEC's Division of Enforcement, and certain other accounting matters identified by the Audit Committee and retained independent counsel to represent CSC on behalf of, and under the exclusive direction of, the Audit Committee in connection with such independent investigation. Independent counsel retained forensic accountants to assist with their work. Independent counsel also represents CSC on behalf of, and under the exclusive direction of, the Audit Committee in connection with the investigation by the SEC's Division of Enforcement.
The Audit Committee’s investigation was expanded to encompass (i) the Company’s operations in Australia, (ii) certain aspects of the Company’s accounting practices within its Americas Outsourcing operation, and (iii) certain of the Company’s accounting practices that involve the percentage-of-completion accounting method, including the Company’s contract with the U.K. National Health Service (NHS). In the course of the Audit Committee's expanded investigation, accounting errors and irregularities were identified. As a result, certain personnel have been reprimanded, suspended, terminated and/or have resigned. The Audit Committee determined in August 2012 that its independent investigation was complete. The Audit Committee instructed its independent counsel to cooperate with the SEC's Division of Enforcement by completing production of documents and providing any further information requested by the SEC's Division of Enforcement.
In addition to the matters noted above, the SEC's Division of Enforcement is continuing its investigation involving its concerns with certain of the Company's prior disclosure and accounting determinations with respect to the Company's contract with the NHS and the possible impact of such matters on the Company's financial statements for years prior to the Company's current fiscal year. The Company and the Audit Committee and its independent counsel are investigating these matters and are continuing to cooperate with the SEC's Division of Enforcement in its investigation of prior disclosures of the Company's contract with the NHS. The SEC's investigative activities are ongoing.
In addition, the SEC's Division of Corporation Finance has issued comment letters to the Company requesting, among other things, additional information regarding its previously disclosed adjustments in connection with the above-referenced accounting errors, the Company's conclusions relating to the materiality of such adjustments, and the Company's analysis of the effectiveness of its disclosure controls and procedures and its internal control over financial reporting. The SEC's Division of Corporation Finance's comment letter process is ongoing, and the Company is continuing to cooperate with that process.
The investigation being conducted by the SEC's Division of Enforcement and the review of our financial disclosures by the SEC's Division of Corporation Finance are continuing and could identify other accounting errors, irregularities or other areas of review. As a result, we have incurred and may continue to incur significant legal and accounting expenditures. We are unable to predict how long the SEC's Division of Enforcement's investigation will continue or whether, at the conclusion of its investigation, the SEC will seek to impose fines or take other actions against the Company. In addition, we are unable to predict the timing of the completion of the SEC's Division of Corporation Finance's review of our financial disclosures or the outcome of such review. Publicity surrounding the foregoing or any enforcement action as a result of the SEC's investigation, even if ultimately resolved favorably for us, could have an adverse impact on the Company's reputation, business, financial condition, results of operations or cash flows. The Company is unable to estimate any possible loss or range of loss associated with these matters.
Out of Period Adjustments Financial Impact Summary
Cumulative Impact of Out of Period Adjustments
The rollover impact on income (loss) from continuing operations before taxes of the recorded out of period adjustments in fiscal 2013, 2012 and 2011 is attributable to the following prior fiscal years:
|
| | | | | | | | | | | | | | | | |
| | Increase/(Decrease) | | |
(Amounts in millions) | | Fiscal 2011 Adjustments | | Fiscal 2012 Adjustments | | Fiscal 2013 Adjustments | | Total Adjustments |
Fiscal 2013 | | $ | — |
| | $ | — |
| | $ | 6 |
| | $ | 6 |
|
Fiscal 2012 | | — |
| | 79 |
| | 7 |
| | 86 |
|
Fiscal 2011 | | 52 |
| | (29 | ) | | (22 | ) | | 1 |
|
Fiscal 2010 | | (48 | ) | | (9 | ) | | 14 |
| | (43 | ) |
Prior fiscal years (unaudited) | | (4 | ) | | (41 | ) | | (4 | ) | | (49 | ) |
See Note 16 for a summary of the effect of the pre-tax out of period adjustments on the Company's segment results for fiscal 2013, 2012 and 2011.
Fiscal 2013 Adjustments Financial Impact Summary
During fiscal 2013, the Company identified and recorded net adjustments decreasing income from continuing operations before taxes by $6 million that should have been recorded in prior fiscal years. This net impact on income from continuing operations before taxes for fiscal 2013 is comprised of the following:
| |
• | net adjustments decreasing fourth quarter pre-tax income by $9 million resulting primarily from the correction of inappropriately capitalized operating costs originating from MSS, a software revenue recognition correction originating from the Company's Business Solutions and Services (BSS) segment and the correction of understated payroll and related expenses at Corporate; |
| |
• | net adjustments decreasing third quarter pre-tax income by $1 million primarily resulting from the correction of useful lives of property and equipment in service at a BSS contract that were inconsistent with established CSC accounting conventions; |
| |
• | net adjustments increasing second quarter pre-tax income by $5 million primarily resulting from the correction of accounting errors identified by the Company related to costs incurred under the NHS contract (see below for more discussion of out of period adjustments related to the Company's NHS contract); and |
| |
• | net adjustments decreasing first quarter pre-tax income by $1 million primarily resulting from the corrections of fiscal 2012 revenue recognized on a software contract in the Company's BSS segment, corrections of fiscal 2012 restructuring cost accruals originating primarily from the Company's BSS and MSS segments and corrections to record adjustments originating primarily from the Company's North American Public Sector (NPS) and MSS segments that were identified late in the close process but not included in the Company's consolidated fiscal 2012 financial statements |
Adjustments recorded during fiscal 2013 that should have been recorded in prior fiscal years increased income from continuing operations by $7 million. This increase is attributable to the tax effect of the adjustments described above and $5 million of discrete tax benefits that should have been recorded in prior fiscal years. The discrete tax benefits are primarily attributable to the adjustment of the deferred tax liability related to intellectual property assets.
NHS
As previously disclosed in fiscal 2012 and in the first quarter of fiscal 2013, the Company had identified certain additional items related to the investigation of the Company's use of the percentage-of-completion accounting method used on the NHS contract. During the second quarter of fiscal 2013, based on its analysis of these items, the Company recorded net credits of $9 million in pre-tax out of period adjustments impacting prior fiscal years. During the third quarter of fiscal 2013, the Company identified additional prior period errors. Such errors identified in the third quarter, which were self-correcting in the third quarter of fiscal 2012, have no impact on income from continuing operations before taxes for fiscal 2013. The accounting errors identified during fiscal 2013 are primarily related to either costs incurred under the contract or the estimation of contract revenues and costs at completion, which resulted in the overstatement of income from continuing operations before taxes. The Company has concluded that there is no cumulative impact of this overstatement as a result of the $1.5 billion specified contract charge recorded as of December 30, 2011 being overstated by the same amount.
The Company has concluded that the errors identified during fiscal 2013 do not appear to have any impact on amounts charged to the NHS. Based on information provided by independent counsel, the Company believes that a small portion of such adjustments should be characterized as intentional accounting irregularities. The impact on income (loss) from continuing operations before taxes of the out of period adjustments identified in fiscal 2013 related to the Company's NHS contract is attributable to the following prior fiscal years:
|
| | | | |
| | Increase/(Decrease) |
(Amounts in millions) | | Fiscal 2013 Adjustments |
Fiscal 2013 | | $ | (9 | ) |
Fiscal 2012 | | 10 |
|
Fiscal 2011 | | (15 | ) |
Fiscal 2010 | | 18 |
|
Prior fiscal years (unaudited) | | (4 | ) |
The following table summarizes the cumulative effect on net income attributable to CSC common shareholders of the consolidated out of period adjustments recorded during fiscal 2013 under the rollover method. The amounts noted below also include certain adjustments that only impacted quarters (unaudited) within fiscal 2013, but had no net impact on the full year fiscal 2013 results:
|
| | | | | | | | | | | | | | | | | | | | |
| | Fiscal 2013 | | |
| | Quarter Ended | | |
(Amounts in millions) | | June 29, 2012 | | September 28, 2012 | | December 28, 2012 | | March 29, 2013 | | Total |
NHS adjustments | | $ | — |
| | $ | (9 | ) | | $ | — |
| | $ | — |
| | $ | (9 | ) |
Other adjustments | | 3 |
| | 12 |
| | 4 |
| | (4 | ) | | 15 |
|
Effect on income from continuing operations before taxes | | 3 |
| | 3 |
| | 4 |
| | (4 | ) | | 6 |
|
Taxes on income | | (2 | ) | | (1 | ) | | (4 | ) | | (1 | ) | | (8 | ) |
Other income tax adjustments | | (2 | ) | | — |
| | (2 | ) | | (1 | ) | | (5 | ) |
Effect on income from discontinued operations, net of taxes | | — |
| | — |
| | (28 | ) | | 28 |
| | — |
|
Effect on net income attributable to CSC common shareholders | | $ | (1 | ) | | $ | 2 |
| | $ | (30 | ) | | $ | 22 |
| | $ | (7 | ) |
Out of period adjustments recorded in fiscal 2013 had the following impact on select line items of the Consolidated Statements of Operations for the twelve months ended March 29, 2013 under the rollover method: |
| | | | | | | | | | | | |
| | Twelve Months Ended March 29, 2013 |
(Amounts in millions, except per-share amounts) | | As Reported | | Adjustments Increase/ (Decrease) | | Amount Adjusted for Removal of Errors |
Revenues | | $ | 14,993 |
| | 14 |
| | $ | 15,007 |
|
Costs of services (excludes depreciation and amortization and restructuring costs) | | 11,851 |
| | 6 |
| | 11,857 |
|
Selling, general and administrative (excluding restructuring costs) | | 1,195 |
| | (1 | ) | | 1,194 |
|
Depreciation and amortization | | 1,076 |
| | (2 | ) | | 1,074 |
|
Restructuring costs | | 264 |
| | 5 |
| | 269 |
|
Interest expense | | 183 |
| | — |
| | 183 |
|
Other (income) expense | | (34 | ) | | — |
| | (34 | ) |
Income from continuing operations before taxes | | 480 |
| | 6 |
| | 486 |
|
Taxes on income | | (35 | ) | | 13 |
| | (22 | ) |
Income from continuing operations | | 515 |
| | (7 | ) | | 508 |
|
Income from discontinued operations, net of taxes | | 464 |
| | — |
| | 464 |
|
Net income attributable to CSC common shareholders | | 961 |
| | (7 | ) | | 954 |
|
EPS – Diluted | | | | | | |
Continuing operations | | $ | 3.20 |
| | $ | (0.04 | ) | | $ | 3.16 |
|
Discontinued operations | | 2.98 |
| | — |
| | 2.98 |
|
Total | | $ | 6.18 |
| | $ | (0.04 | ) | | $ | 6.14 |
|
The out of period adjustments affecting income from continuing operations before taxes during the twelve months ended March 29, 2013 under the rollover method are related to the following consolidated balance sheet line items:
| |
• | Accounts receivable ($1 million decrease); |
| |
• | Prepaid expenses and other current assets ($15 million increase); |
| |
• | Outsourcing contract costs ($1 million decrease); |
| |
• | Other assets ($6 million decrease); |
| |
• | Property and equipment ($5 million decrease); |
| |
• | Accrued payroll and related costs ($9 million increase); |
| |
• | Accrued expenses and other current liabilities ($12 million decrease); and |
| |
• | Deferred revenue ($13 million increase). |
The Company has determined that the impact of the consolidated out of period adjustments recorded in fiscal 2013 is immaterial to the consolidated results, financial position and cash flows for fiscal 2013 and prior years. Consequently, the cumulative effect of these adjustments was recorded during fiscal 2013.
Fiscal 2012 Adjustments Financial Impact Summary
As previously disclosed, during fiscal 2012, the Company recorded various pre-tax adjustments that should have been recorded in prior fiscal years. The aggregate fiscal 2012 adjustments increased the loss from continuing operations before taxes by $79 million ($63 million net of tax) and were comprised of $13 million of charges relating to operations in the Nordic region, $23 million of charges relating to the Company's operations in Australia, and $25 million of charges originating from the NHS contract in the Company's BSS segment. Additionally, $16 million and $2 million of charges were recorded in the NPS segment and other operations of the Company, respectively. The fiscal 2012 out of period adjustments primarily related to the Company’s MSS and BSS segments, with $37 million and $26 million of adjustments within MSS and BSS, respectively. Further adjustments were identified and recorded in fiscal 2013 related to fiscal 2012 that increased the net error by $7 million.
Nordic Region
The Company attributes the $13 million in pre-tax adjustments recorded in the Nordic region in fiscal 2012 to miscellaneous errors and not to any accounting irregularities or intentional misconduct other than a $1 million operating lease adjustment noted in the first quarter of fiscal 2012 which was a refinement of an error previously corrected and reported in fiscal 2011.
Australia
As previously disclosed, in the course of the Australia investigation initiated in fiscal 2012, accounting errors and irregularities were identified. As a result, certain personnel in Australia have been reprimanded, terminated and/or resigned. The Company attributes the $23 million of pre-tax adjustments recorded in fiscal 2012 to either intentional accounting irregularities (intentional irregularities) or other accounting errors (Other Errors). Other Errors include both unintentional errors and errors for which the categorization is unclear. The categorizations were provided to the Company through the independent investigation. The impact of the adjustments on income (loss) from continuing operations before taxes is attributable to the following prior fiscal years:
|
| | | | | | | | | | | | | | | | | | | | |
| | Increase/(Decrease) |
(Amounts in millions) | | Fiscal 2008 & Prior (unaudited) | | Fiscal 2009 (unaudited) | | Fiscal 2010 | | Fiscal 2011 | | Total |
Intentional irregularities | | $ | 10 |
| | $ | (7 | ) | | $ | (4 | ) | | $ | 1 |
| | $ | — |
|
Other Errors | | (7 | ) | | (16 | ) | | 3 |
| | (3 | ) | | (23 | ) |
| | $ | 3 |
| | $ | (23 | ) | | $ | (1 | ) | | $ | (2 | ) | | $ | (23 | ) |
NHS
As previously disclosed, in fiscal 2012, $25 million of out of period adjustments reducing income from continuing operations related to the Company's NHS contract were identified and recorded. During the course of the investigation in fiscal 2012 of the percentage-of-completion accounting method used on the Company's NHS contract, certain accounting errors were identified related to costs incurred under the contract, which resulted in errors in the recognition of income from continuing operations that would have reduced by approximately $24 million the $1.5 billion write-off recorded by the Company in the third quarter of fiscal 2012. Although the Company has concluded that these errors do not appear to have any impact on amounts charged to the NHS, the errors have impacted the operating income recognized on the NHS contract. The exclusion of certain costs incurred under the contract caused the estimated margin at completion, which determines the operating income that is booked when revenue milestones are achieved, to be overstated. Although the Company has concluded that there is no cumulative impact as a result of the $1.5 billion charge relating to the NHS contract recorded as of December 30, 2011, operating income from fiscal year 2007 through and including fiscal 2011 has been overstated by a total of approximately $24 million and, therefore, the charge taken by the Company as of December 30, 2011 was overstated by approximately the same amount.
Certain additional items had been identified related to the NHS contract that could have had an effect on the amount and the allocation of the out of period adjustments for fiscal 2012 and prior fiscal years. These additional items were subject to further investigation and therefore were not recorded in fiscal 2012. See our discussion of fiscal 2013 adjustments above for further information regarding the impact of such items.
Certain CSC finance employees based in the U. K. were aware prior to fiscal 2012 of the aforementioned errors, but those employees failed to appropriately correct the errors. Therefore, the Company has classified these errors as intentional. Such categorization was provided to the Company through the independent investigation. As a result, certain personnel have been suspended.
The impact on income (loss) from continuing operations before taxes of the $25 million of out of period adjustments identified in fiscal 2012 related to the Company's NHS contract is attributable to the following prior fiscal years:
|
| | | |
| Increase/(Decrease) |
(Amounts in millions) | Fiscal 2012 Adjustments |
Fiscal 2012 | $ | 25 |
|
Fiscal 2011 | (7 | ) |
Fiscal 2010 | (4 | ) |
Prior fiscal years (unaudited) | (14 | ) |
NPS
As previously reported, in fiscal 2012 the Company identified and recorded pre-tax adjustments reducing income from continuing operations before taxes by $16 million. Such adjustments were identified by the Company and were primarily related to the percentage-of-completion accounting adjustments.
Americas Outsourcing
As previously disclosed, in the course of the independent investigation of Americas Outsourcing accounting practices, accounting conventions used by Americas Outsourcing relating to intraperiod cost allocations were determined to be unintentional accounting errors. The errors did not have an impact on a fiscal year basis. The Company also determined that other operating units employed similar practices and made necessary corrections.
The following table summarizes the cumulative effect on the fiscal 2012 net loss attributable to CSC common shareholders of the consolidated out of period adjustments recorded during fiscal 2012 and fiscal 2013 under the rollover method. The amounts noted below also include certain adjustments that only impacted quarters (unaudited) within fiscal 2012, but had no net impact on the full year fiscal 2012 results:
|
| | | | | | | | | | | | | | | | | | | | |
| | Fiscal 2012 | | |
| | Quarter Ended | | |
(Amounts in millions) | | July 1,
2011 | | September 30,
2011 | | December 30,
2011 | | March 30,
2012 | | Total |
Operating costs inappropriately capitalized | | $ | 1 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 1 |
|
Misapplication of US GAAP | | 1 |
| | (1 | ) | | 2 |
| | (1 | ) | | 1 |
|
Miscellaneous errors | | 2 |
| | 7 |
| | — |
| | 2 |
| | 11 |
|
Total Nordic adjustments | | 4 |
| | 6 |
| | 2 |
| | 1 |
| | 13 |
|
Operating costs inappropriately capitalized | | — |
| | 11 |
| | — |
| | — |
| | 11 |
|
Misapplication of US GAAP | | — |
| | 8 |
| | — |
| | 1 |
| | 9 |
|
Miscellaneous errors | | — |
| | 2 |
| | 2 |
| | (1 | ) | | 3 |
|
Total Australia adjustments | | — |
| | 21 |
| | 2 |
| | — |
| | 23 |
|
NHS adjustments | | (2 | ) | | (2 | ) | | 46 |
| | (7 | ) | | 35 |
|
NPS adjustments | | 3 |
| | 1 |
| | (5 | ) | | 11 |
| | 10 |
|
Other adjustments | | 2 |
| | (11 | ) | | 5 |
| | 9 |
| | 5 |
|
Effect on income (loss) from continuing operations before taxes | | 7 |
| | 15 |
| | 50 |
| | 14 |
| | 86 |
|
Taxes on income | | (2 | ) | | (3 | ) | | (2 | ) | | (4 | ) | | (11 | ) |
Other income tax adjustments | | 1 |
| | 14 |
| | (10 | ) | | (5 | ) | | — |
|
Effect on net income (loss) attributable to CSC common shareholders | | $ | 6 |
| | $ | 26 |
| | $ | 38 |
| | $ | 5 |
| | $ | 75 |
|
Out of period adjustments recorded during fiscal 2012 and fiscal 2013 had the following impact on select line items of the Consolidated Statements of Operations for the twelve months ended March 30, 2012 under the rollover method:
|
| | | | | | | | | | | | |
| | Twelve Months Ended March 30, 2012 |
(Amounts in millions, except per-share amounts) | | As Reported | | Adjustments Increase/ (Decrease) | | Amount Adjusted for Removal of Errors |
Revenues | | $ | 15,364 |
| | $ | 56 |
| | $ | 15,420 |
|
Costs of services (excludes depreciation and amortization, specified contract charge, settlement charge and restructuring costs) | | 13,019 |
| | (27 | ) | | 12,992 |
|
Cost of services – specified contract charge (excludes amount charged to revenue of $204) | | 1,281 |
| | 3 |
| | 1,284 |
|
Selling, general and administrative (excludes restructuring costs) | | 1,128 |
| | 2 |
| | 1,130 |
|
Depreciation and amortization | | 1,147 |
| | (2 | ) | | 1,145 |
|
Restructuring costs | | 140 |
| | (5 | ) | | 135 |
|
Interest expense | | 175 |
| | (3 | ) | | 172 |
|
Other (income) expense | | (6 | ) | | 2 |
| | (4 | ) |
Loss from continuing operations before taxes | | (4,454 | ) | | 86 |
| | (4,368 | ) |
Taxes on income | | (84 | ) | | 11 |
| | (73 | ) |
Loss from continuing operations | | (4,370 | ) | | 75 |
| | (4,295 | ) |
Income from discontinued operations, net of taxes | | 145 |
| | — |
| | 145 |
|
Net loss attributable to CSC common shareholders | | (4,242 | ) | | 75 |
| | (4,167 | ) |
EPS – Diluted | | | | | | |
Continuing operations | | $ | (28.31 | ) | | $ | 0.48 |
| | $ | (27.83 | ) |
Discontinued operations | | 0.94 |
| |
|
| | 0.94 |
|
Total | | $ | (27.37 | ) | | $ | 0.48 |
| | $ | (26.89 | ) |
The out of period adjustments affecting loss from continuing operations before taxes during the twelve months ended March 30, 2012 under the rollover method are related to the following consolidated balance sheet line items:
| |
• | Accounts receivable ($66 million decrease); |
| |
• | Prepaid expenses and other current assets ($44 million increase); |
| |
• | Other assets ($6 million increase); |
| |
• | Property and equipment ($29 million decrease); |
| |
• | Accrued payroll and related costs ($2 million decrease); |
| |
• | Accrued expenses and other current liabilities ($46 million increase); and |
| |
• | Deferred revenue ($3 million decrease). |
The Company has determined that the impact of the consolidated out of period adjustments recorded in fiscal 2012 and fiscal 2013 is immaterial to the consolidated results, financial position and cash flows for fiscal 2012 and prior years. Consequently, the cumulative effect of these adjustments was recorded during fiscal 2012 and fiscal 2013.
Fiscal 2011 Adjustments Financial Impact Summary
As previously reported, during fiscal 2011, the Company recorded $52 million of pre-tax adjustments that should have been recorded in prior fiscal years. The total out of period adjustments recorded in fiscal 2011 were comprised of $92 million of charges reducing income from continuing operations before taxes originating out of the Company’s MSS operations in the Nordic region, and $40 million of adjustments increasing income from continuing operations before taxes, with $36 million of the $40 million within MSS. Further adjustments were identified and recorded in fiscal 2012 and 2013 related to fiscal 2011 that reduced the net error by $29 million and $22 million, respectively.
Nordic Region
As noted above, during fiscal 2011, the Company commenced an investigation into accounting irregularities in the Nordic region. Based upon the Company's investigation, review of underlying documentation for certain transactions and balances, review of contract documentation and discussions with Nordic personnel, the Company attributes the majority of the $92 million of pre-tax adjustments recorded in the Nordic region in fiscal 2011 to accounting irregularities arising from suspected intentional misconduct by certain former employees in our Danish subsidiaries. These accounting irregularities included the inappropriate capitalization of operating costs, the misapplication of U.S. GAAP and miscellaneous errors.
The following table summarizes the cumulative effect on the fiscal 2011 net income attributable to CSC common shareholders of the consolidated out of period adjustments recorded during fiscal 2011, 2012 and 2013. The amounts noted below also include certain adjustments that only impacted quarters (unaudited) within fiscal 2011, but had no net impact on the full year fiscal 2011 results:
|
| | | | | | | | | | | | | | | | | | | | |
| | Fiscal 2011 | | |
| | Quarter Ended | | |
(Amounts in millions) | | July 2,
2010 | | October 1,
2010 | | December 31,
2010 | | April 1,
2011 | | Total |
Operating costs inappropriately capitalized | | $ | 15 |
| | $ | 38 |
| | $ | 8 |
| | $ | 6 |
| | $ | 67 |
|
Misapplication of US GAAP | | 4 |
| | 3 |
| | 6 |
| | (1 | ) | | 12 |
|
Miscellaneous errors | | 1 |
| | (1 | ) | | 9 |
| | (2 | ) | | 7 |
|
Total Nordic adjustments | | 20 |
| | 40 |
| | 23 |
| | 3 |
| | 86 |
|
Operating costs inappropriately capitalized | | — |
| | (1 | ) | | (1 | ) | | — |
| | (2 | ) |
Misapplication of US GAAP | | — |
| | 1 |
| | 3 |
| | (1 | ) | | 3 |
|
Miscellaneous errors | | (4 | ) | | 5 |
| | (2 | ) | | (3 | ) | | (4 | ) |
Total Australia adjustments | | (4 | ) | | 5 |
| | — |
| | (4 | ) | | (3 | ) |
NHS adjustments | | (10 | ) | | (2 | ) | | (5 | ) | | (5 | ) | | (22 | ) |
NPS adjustments | | 4 |
| | 2 |
| | (10 | ) | | (7 | ) | | (11 | ) |
Other adjustments | | (9 | ) | | (8 | ) | | (18 | ) | | (14 | ) | | (49 | ) |
Effect on income from continuing operations before taxes | | 1 |
| | 37 |
| | (10 | ) | | (27 | ) | | 1 |
|
Taxes on income | | 4 |
| | 1 |
| | 9 |
| | 10 |
| | 24 |
|
Other income tax adjustments | | (1 | ) | | (13 | ) | | (6 | ) | | 18 |
| | (2 | ) |
Effect on net income attributable to CSC common shareholders | | $ | 4 |
| | $ | 25 |
| | $ | (7 | ) | | $ | 1 |
| | $ | 23 |
|
Out of period adjustments recorded during fiscal 2011, 2012 and 2013 had the following impact on select line items of the Consolidated Statements of Operations for the twelve months ended April 1, 2011 under the rollover method:
|
| | | | | | | | | | | | |
| | Twelve Months Ended April 1, 2011 |
(Amounts in millions, except per-share amounts) | | As Reported | | Adjustments Increase/ (Decrease) | | Amount Adjusted for Removal of Errors |
Revenues | | $ | 15,582 |
| | $ | 1 |
| | $ | 15,583 |
|
Costs of services (excludes depreciation and amortization) | | 12,578 |
| | (4 | ) | | 12,574 |
|
Selling, general and administrative | | 949 |
| | 1 |
| | 950 |
|
Depreciation and amortization | | 1,068 |
| | 3 |
| | 1,071 |
|
Interest expense | | 167 |
| | — |
| | 167 |
|
Other (income) expense | | (21 | ) | | — |
| | (21 | ) |
Income from continuing operations before taxes | | 878 |
| | 1 |
| | 879 |
|
Taxes on income | | 202 |
| | (22 | ) | | 180 |
|
Income from continuing operations | | 676 |
| | 23 |
| | 699 |
|
Income from discontinued operations, net of taxes | | 83 |
| | — |
| | 83 |
|
Net income attributable to CSC common shareholders | | 740 |
| | 23 |
| | 763 |
|
EPS – Diluted | | | | | | |
Continuing operations | | $ | 4.20 |
| | $ | 0.15 |
| | $ | 4.35 |
|
Discontinued operations | | 0.53 |
| | — |
| | 0.53 |
|
Total | | $ | 4.73 |
| | $ | 0.15 |
| | $ | 4.88 |
|
The Company has determined that the impact of the consolidated out of period adjustments recorded in fiscal 2013, 2012, and 2011 is immaterial to the consolidated results, financial position and cash flows for fiscal 2011 and prior years. Consequently, the cumulative effect of these adjustments was recorded during fiscal 2011.
