Time Warner has been forced to set aside $500 million to deal with legal costs following investigations into accounting practices at the world’s biggest media company.
The news came as the company reported an 8 per cent fall in third-quarter profits to $499 million. The company also said that it would have to restate results for its America Online Europe division prior to 2002 and warned that it may have to revise other results.
America Online’s accounting practices are under investigation by the US Securities and Exchange Commission and the Justice Department. They are looking into how Time Warner accounted for $400 million that Bertelsmann AG paid to America Online for advertising from 2001 to 2003.
Time said the revisions could add more than $850 million to losses for 2001 and more than $300 million to its losses for 2000.
Commenting on the company’s plans to restate earnings, analyst Rob Sanderson of American Technology Research in San Francisco, told AFP: “That’s new – it’s not something we had heard before. But it’s nothing fundamentally critical and it will have no impact on the future.”