Computer Sciences defends accounting

Ed Frauenheim
Ed Frauenheim Former Staff Writer, News
Ed Frauenheim covers employment trends, specializing in outsourcing, training and pay issues.
Information technology services company Computer Sciences defended its accounting methods amid concerns that it has begun to capitalize some selling, general and administrative (SG&A) costs. Improperly capitalizing SG&A costs can allow a company to hide expenses and boost earnings. A report issued Wednesday from investment firm Bernstein called attention to higher outsourcing contract cost capitalization and declining SG&A costs at Computer Sciences and asked for more disclosure.

Leon Level, chief financial officer of Computer Sciences, responded to the report Wednesday afternoon, saying that the change in "SG&A as a percent of revenue in recent years is due to operating performance improvement and business mix factors and not to any change in our longstanding outsourcing contract cost capitalization policy and pattern." Level also said since the company entered the commercial outsourcing business in 1991, capitalization of contract costs has always trailed contract announcements.