2 years later, Dell stays mum on accounting probe

SAN FRANCISCO -- A Securities and Exchange Commission probe into Dell's accounting is more than 2 years old — and the PC giant won't say when it might be over.

That leaves investors and customers wondering how big the problem is, says tech analyst Martin Reynolds at researcher Gartner. "We really don't know what's going on," he says.

Most have taken the investigation in stride so far. Dell's shares have risen 16% since the investigation was announced a year ago. But the accounting woes could be a big distraction if they continue — or prove to be bigger than thought, Reynolds says. Dell doesn't need that. It is already struggling, losing market share to Hewlett-Packard and seeing its once-cushy profit margins decline, he says.

Kenneth Goldmann, a partner at accounting firm J.H. Cohn, and other accounting experts say it's possible to make an educated guess about what's wrong at Dell, based on the little bit of information it has released. Dell has put out statements saying accounting issues are related to "revenue recognition" and "accruals, reserves and other balance-sheet items."

That likely means Dell has uncovered problems with the way it saved up for a rainy day, says Tracy Coenen of Sequence Inc. Forensic Accounting. (Forensic accountants review corporate financials to uncover problems.) Potential issues:

•Sales. Deciding when to record a sale is harder than it sounds. Let's say a company buys 100 Dell PCs, to be delivered in 30 days. Is the sale recorded when the order is placed? When the computers are delivered? Or when the company pays for them?

In accounting, such questions are governed under revenue-recognition rules. These rules are complex and sometimes misunderstood — or fudged, Goldmann says.