Market Watch

[Joemoney]

Microsoft Settles with SEC - Source

WASHINGTON (Reuters) - The Securities and Exchange Commission has agreed to settle with Microsoft Corp. (NasdaqNM:MSFT - News) over allegations the software giant misled investors by understating revenues, a source familiar with the matter said on Friday.

Without admitting any wrongdoing or facing any fine, Microsoft will cease using the accounting practice to smooth out its earnings under the pact approved in an SEC vote taken on Thursday, the source said.

Commissioners Isaac Hunt and Cynthia Glassman backed the settlement. SEC Chairman Harvey Pitt, who represented Microsoft's auditor Deloitte & Touche LLP as a private securities attorney, recused himself.

For more than two years, the SEC had been looking at Microsoft's alleged use of so-called "cookie jar" accounting -- the practice of taking reserves that can be used to pad revenues during lean times.

SEC spokeswoman Christi Harlan declined to comment on the closed meeting. A Microsoft spokesman could not immediately be reached for comment.

The SEC has been aggressive recently in probing accounting irregularities involving overstatement of revenues. The Microsoft probe was somewhat unusual because it involved allegations of deliberately understating revenues.

Microsoft shares were down 66 cents to $51.98 in late afternoon on the Nasdaq market.

http://biz.yahoo.com/rb/020531/tech_microsoft_sec_1.html