IT Manager’s Journal: Why Red Hat is Restating its Financials for Last Three Years

“On Tuesday, Red Hat issued a press release and held a
conference call to announce it would be delaying Red Hat’s first
fiscal quarter 2005 10Q filing. The reason for the delay is that
management is restating Red Hat’s results for the three fiscal
years 2002, 2003 and 2004 (all of which had been audited) and its
most recently reported first fiscal quarter 2005 (which has not yet
been audited).

“According to management, the restatement is due entirely to the
correction in Red Hat’s method of recognizing revenue for
subscription agreements. They state that the net result of using
the new revenue recognition method will be to shift the timing of
when subscription revenues are recognized. A portion of the revenue
that had been previously recognized in the month of commencement of
a subscription will be shifted (i.e. delayed) to the month in which
the subscription ends…”

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