Ex-Autonomy chiefs say HP was warned over revenue growth

A due diligence report  for HP mentioned accounting differences

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The Independent Online

The bitter feud between Hewlett-Packard and former executives of Autonomy took another twist yesterday after two ex-directors of the British tech company claimed HP knew recorded revenue growth would be warped after the takeover.

HP bought the Cambridge-based Autonomy in an ill-fated $11.1bn (£7.3bn) takeover in 2011. It was forced to book an $8.8bn writedown on the company just a year later.

Around $5.5bn of that was due to “accounting misrepresentations,” it alleged.

The American tech giant  is suing Autonomy’s former bosses  – the former chief executive Mike Lynch and former finance boss Sushovan Hussain – in a $5bn claim amid allegations of fraud.

However, documents released yesterday on behalf of Mr Lynch and Mr Hussain show that a due-diligence report prepared by the accountancy firm KPMG for HP said contrasting accounting policies on either side of the Atlantic could have affected how Autonomy’s revenues would translate on to an American balance sheet.

American investors use an accounting policy known as GAAP, while in the UK a standard called IFRS is used, meaning one set of financial figures can look different when translated to either standard.

“We believe there may be differences which could impact the historical growth rate and the timing of revenue recognition post-closing,” the report said.

“When data becomes available, consider US GAAP differences on historical growth rates and the potential impact on revenue recognition in immediate post-acquisition period.”

Meg Whitman, HP’s chief executive, had previously said the British tech company was “smaller, less profitable and slower-growing than we were led to believe”.

The fallout from the takeover has prompted a long-running legal battle between both sides.

A Serious Fraud Office investigation into the sale of Autonomy – prompted by calls for an inquiry by HP – was closed in January this year due to “insufficient evidence”.

The American company subsequently filed a civil claim against Mr Lynch and Mr Hussain in London, claiming the duo caused Autonomy to engage in “improper transactions” and accounting policies that “artificially inflated and accelerated” Autonomy’s revenues.

Mr Lynch and Mr Hussain both deny the allegations.

Other details in the accountancy firm’s  due-diligence report show that HP was aware of how Autonomy recognised its reseller deals in accordance with IFRS accounting practices.

HP has filed the case at the High Court in London.  

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