Manipulation of Tax-Related Income The company knew or was reckless in not knowing that these accounts were used unlawfully. By using these accounting actions and failing to disclose their use, Xerox violated GAAP as well as disclosure requirements.
Beginning that same year, Xerox violated GAAP by retroactively increasing the estimated residual value of equipment.
This Court has jurisdiction over this action pursuant to Sections 20 b and 22 a of the Securities Act [15 U. InXerox substantially departed from its historical accounting methods to improperly manage its earnings, accelerate recognition of equipment revenue and earnings growth, and meet Wall Street analyst expectations.
Xerox is a public company whose securities are registered with the Commission pursuant to Section 12 b of the Exchange Act and it is required to file periodic reports with the Commission pursuant to Section 13 of the Act.
Sales and allocation of revenues were initially booked by operating units, which did not use margin normalization. Despite this knowledge, Xerox routinely painted a false portrait of its financial condition in the periodic reports it filed with the Commission, as well as in quarterly earnings releases, financial reviews, and other financial summaries publicly issued by the company.
The complaint alleges that the failure to disclose the changes in accounting methods and estimates was fraudulent. Xerox's senior management was informed of the most material of these accounting actions and the fact that they were taken for the purpose of what the company called "closing the gap" to meet performance targets.
Neither Xerox management nor its outside auditor ever tested Xerox's claim that the top-side adjustments were necessary to arrive at the actual prevailing equipment finance rates appropriate to the customer. Xerox used the return-on-equity method to shift revenue to the "box" that the company had historically allocated to financing.
Xerox's financial reporting was materially misleading as a result of violations of GAAP and the failure to disclose material changes in accounting methods.