It's no secret that Time Warner has been loosing money ever since it merged with AOL in 2001. Now Time Warner is determining whether or not America Online improperly accounted for losses at its European division before the merger. Apparently AOL Europe suffered significant losses that American Online didn't incorporate in its own financial results.
Time Warner Inc. has launched an internal investigation to determine whether America Online improperly accounted for losses at its European division before and after the AOL-Time Warner merger in 2001, the media giant disclosed yesterday. During the period in question, AOL Europe posted significant losses that Dulles-based America Online did not incorporate in its own financial results, according to public filings. Time Warner said it may have to restate earnings as a result of its review.
The bookkeeping under scrutiny involved the sale of a small stake in AOL Europe to Goldman Sachs Group, which temporarily reduced AOL's ownership in AOL Europe to below 50 percent, according to a recent article in Business Week. Since it was no longer a majority stockholder, AOL reported AOL Europe's results separately from its own. The maneuvers may have helped AOL keep its earnings and stock price up prior to its January 2001 merger with Time Warner, the article said. AOL eventually repurchased the stake from Goldman to again become the majority shareholder.
News source: Yahoo! News