Xerox Corporation

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Submitted By helsaad
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Xerox Corporation was founded in 1906 in Rochester, New York. Xerox manufactures and sells a wide range of color and black-and-white printers, multifunction systems, photo copiers, digital production printing presses, and related consulting services and supplies. Xerox is headquartered in Norwalk, Connecticut. Barry D. Romeril, Xerox’s chief financial officer (CFO) and Paul Allaire, Xerox’s chairman and corporate executive officer (CEO) were leading Xerox through a difficult period in the late 1990’s. During this time Xerox was faced with tough competition from foreign markets while losing a large portion of their small copier business to desktop printers. During this period, Xerox also lost millions of dollars on their diversification effort into insurance and financial services. In spite of that, Mr. Allaire and Mr. Romeril continued to keep Xerox’s stock prices and earnings high. By the mid-1990s Xerox management had decided they were going to have their accountants come up with creative accounting if they were going to continue to show the Wall Street and their stockholders that they were still able to meet their earnings expectations (SEC Release No. 18174, 2003).
Xerox revealed in 2002 that over the last five years prior to 2002 it had improperly classified over $6 billion in revenue which led to an overstatement of earnings by $2 billion. The Securities and Exchange Commission (SEC) was investigating Xerox and it charged the company with accounting manipulations (SEC Release No. 2002-52, 2002). There were two manipulations that formed the basis for the SEC investigation. The first manipulation involved improperly storing revenue off the balance sheet and then releasing the stored funds at strategic times in order to boost lagging earnings for a particular quarter. This method was called the “cookie jar” method. The second manipulation was the…...

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