Hewlett-Packard Co. ended 2012 by disclosing not-so-newsy news that no company wants to see in a 10-K filing: the Department of Justice, the Securities and Exchange Commission, and the U.K. Serious Fraud Office all are probing its 2011 purchase of British software company Autonomy Corp. plc, albeit with HP's cooperation. The problems over the huge sticker price – later negated in a monster writedown — made headlines in November.

HP executives, ex-officials, and board members also face shareholder suits over the company's problematic acquisition of Autonomy for more than $11 billion. About a year after the purchase, HP took a non-cash impairment charge of $8.8 billion stemming from the merger.

HP blames Autonomy for accounting improprieties and other bad reporting that it says led to a $5 billion-plus portion of the impairment. A former Autonomy chief who later joined, and since has left, Hewlett-Packard denies HP's allegations.

At a leading accounting conference on Dec. 5, Elizabeth Mooney, an analyst and vice president at Capital Strategy Research, Inc. in San Francisco, aired her worries about fresh standards on revenue reporting that are to be issued in mid-2013. The Financial Accounting Standards Board and the International Accounting Standards Board have been writing the new revenue rules.

"I fear with revenue recognition that we are going to have more aggressive revenue recognition – like more Autonomys, not fewer – when the standard gets implemented," Mooney, a member of FASB's Investors Technical Advisory Committee, said in a discussion as one member of an investors panel at the conference of the American Institute of Certified Public Accountants.

"There's a whole lot missing," the California analyst added, as discussed in a previous panel at the Washington conference, she said.

Earlier in the AICPA conference, Jack Ciesielski, a Baltimore analyst and publisher of Analyst's Accounting Observer, raised the HP/Autonomy scenario — without naming the firms – when he posed a question to FASB Chairman Leslie Seidman and IASB Chairman Hans Hoogervorst in a session he moderated. Ciesielski, president of R.G. Associates, prefaced his question by stating that he was talking about the forthcoming revenue recognition standards.

"When there is a large tragic failure in the physical world," Ciesielski said, such as bridges falling or some of the disasters in the U.S. space program, "there is a standing down, where everything is reviewed" and a "complete examination, a post-mortem of what went wrong" are conducted.

In the realm of financial reporting, he continued, "we have an evolving, semi-tragic situation" centering on the reporting of a U.S. technology company that acquired another company that was using the IASB-written international financial reporting standards.

Allegations have been made, as reported in the news media, Ciesielski said, and "a lot of these allegations center on revenue recognition." The case he described "may play out over a long time, in court," he said.

"Do you think that we need to stand down on the revenue recognition standard" in order "to see what we can learn from what's unfolding on revenue recognition in this particular instance, and make sure that we've got the process engineered properly?" Ciesielski asked Seidman and Hoogervorst.

"Or, if I could rephrase it differently," he added, "are your comfortable with the standard" that is being prepared for finalization "based on what you don't know yet?"

FASB's Seidman responded first by saying that when she sees news reports on such cases, she thinks " `Uh-oh.' Was the accounting at issue? Was the standard at issue? And, frankly, we don't know enough yet about this particular case to know that.

"But, rest assured, every time there is a situation like this, we endeavor to find out whether the situation involved fraud, misapplication of a fine standard, or there's an opportunity to improve the standard itself," Seidman added.

On whether the boards should move forward with the revenue recognition standard, the FASB chief said, first, it is important to stress the extensive – and "widely commended" — due process that has taken place. "Throughout the standard-setting process," Seidman said, "we have very much been cross-checking against the most common reasons, besides fraud, for restatement in the area of revenue recognition."

Seidman added: "We are not done yet. We will continue to gather information about this particular case to see if there is an issue with the standard." At the end of the day, she said, "every board member has to determine whether they have learned enough to move forward with the standard."

IASB's Hoogervorst concurred with Seidman. He added that standard-setting in accounting is much slower that even the political process, and "we have to get something done every now and then." The boards will continue to proceed carefully while also striving to issue the FASB and IASB standards on their current schedule, and not in "a blind rush," he suggested.

The effective date for the new revenue standards will be sometime after the issuance dates, the IASB chairman said. "Suppose we find out" about "very serious shortcomings" in the rules – an unlikely prospect, he indicated. "There's always time to fix it," Hoogervorst said.

By Steve Burkholder

BNA Tax Managemen Staff Correspondent