IBM Avoids SEC Probe Into Cloud Revenue Accounting

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IBM won’t face any federal action for the way it reports cloud revenue.

Last July, the computer maker told that the Securities and Exchange Commission was looking into how cloud-computing sales were broken down and recorded. Prior to the SEC investigation, IBM talked about its cloud revenue growth rate, but not the size of cloud revenue or how much of that was comprised of as-a-service offerings.

Big Blue did say last year that it was confident its accounting practices were sound, and the SEC apparently has agreed. Earlier this week, IBM said in an SEC filing that the agency “has concluded its investigation regarding how IBM reports cloud revenue. IBM was notified that based on the information to date, the Division of Enforcement does not intend to recommend any enforcement action by the Commission against IBM."

Still, IBM has changed the way it discusses cloud revenue in its quarterly earnings. For example, in the first two quarters of 2013, the company merely bragged that cloud revenue had risen, without providing a breakout. Then, in the third quarter, it started providing details: "Cloud revenue up more than 70 percent year to date; Revenue in third-quarter exceeds $1 billion, of which about $460 million is delivered as a cloud service," IBM wrote.

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