eFuture Information Technology Inc. Announces Anticipated Accounting Adjustments
Reaffirms Upward Revision of 2009 Revenue Guidance of USD28 million to USD29 million Representing Annual Revenue Growth of 38% to 40%.
BEIJING, -- eFuture Information Technology Inc. (Nasdaq: EFUT, the "Company" or "eFuture"), a leading provider of software and services in China's rapidly growing retail and consumer goods industries, announced that eFuture will likely need to make an accounting adjustment to its unaudited earnings reports for quarters ended March 31, June 30, September 30 and December 31, 2008 and March 31, 2009 and that those reports should no longer be relied upon. Since eFuture is currently in the process of assessing the anticipated adjustments, the Company has not determined the extent of the correction.
The specific areas being assessed for accounting adjustments relate to (i) our accounting for a depository reserve we must maintain in China for employee social security costs, (ii) the timing of our recognition of revenues upon sales of some of our software products, and (iii) the method by which we calculate our costs of revenues.
First, we have determined that we have not reserved an adequate amount for these purposes and, as a result, will revise our previously-reported unaudited earnings for the above periods. As a foreign private issuer, we are not required to file quarterly reports but have traditionally provided such information to investors. The correction of the reserve for employee social security costs will result in operating losses in our annual report on Form 20-F that are in excess of those disclosed in our unaudited quarterly earnings reports during the four quarters of fiscal year 2008. This correction will also increase operating losses for our first quarter 2009 beyond those listed in our press release dated June 9, 2009.
Secondly, some of our software products include rights to one year of maintenance to ensure that the software operates properly for the purposes sold. We previously deferred recognition of 10% of the software contract amount for a one-year period from the date of sale and recognized it as revenue after the one-year maintenance period had passed. Our management has determined that these amounts should instead be recognized evenly over the maintenance period. This correction will result in the accelerated recognition of revenues and associated costs of revenues but will not change the ultimate amounts we recognize per service contract.
Finally, our management has determined that it will further improve the accuracy of reflecting its costs of revenues through allocation on the basis of labor costs. We previously allocated our costs of revenues based on out-of-pocket expenses on projects. The change from allocation based on out-of-pocket expenses to allocation based upon labor costs will result in a more accurate estimate of costs of revenues by project, but is not expected to have a material change to the reporting of costs of revenues.
The anticipated accounting adjustments are intended to ensure adequate reserve of social security benefits for our employees and enhance the accurate recognition of revenue and associated costs to better reflect our expanding business and operational performance. The Company remains on track to continue the growth momentum and reaffirms our recent upward revision of 2009 revenue guidance of USD28 million to USD29 million, representing annual revenue growth of 38% to 40%.
About eFuture Information Technology Inc.
eFuture Information Technology Inc. (NASDAQ: EFUT) is a leading provider of software and services in China's rapidly growing retail and consumer goods industries. eFuture provides integrated software and services to manufacturers, distributors, wholesalers, logistics companies and retailers in China's front-end supply chain (from factory to consumer) market, especially in the retail and fast moving consumer goods industries. eFuture currently serves over 15 Fortune 500 companies, over 1,000 retailers and over 5,000 suppliers operating in China. eFuture is one of IBM's premier business partners in Asia Pacific and is a strategic partner with Oracle, Microsoft, JDA, Motorola and Samsung Network China. eFuture has more than 600 employees and 20 branch offices across China. For more information about eFuture, please visit http://www.e-future.com.cn/.
BEIJING, -- eFuture Information Technology Inc. (Nasdaq: EFUT, the "Company" or "eFuture"), a leading provider of software and services in China's rapidly growing retail and consumer goods industries, announced that eFuture will likely need to make an accounting adjustment to its unaudited earnings reports for quarters ended March 31, June 30, September 30 and December 31, 2008 and March 31, 2009 and that those reports should no longer be relied upon. Since eFuture is currently in the process of assessing the anticipated adjustments, the Company has not determined the extent of the correction.
The specific areas being assessed for accounting adjustments relate to (i) our accounting for a depository reserve we must maintain in China for employee social security costs, (ii) the timing of our recognition of revenues upon sales of some of our software products, and (iii) the method by which we calculate our costs of revenues.
First, we have determined that we have not reserved an adequate amount for these purposes and, as a result, will revise our previously-reported unaudited earnings for the above periods. As a foreign private issuer, we are not required to file quarterly reports but have traditionally provided such information to investors. The correction of the reserve for employee social security costs will result in operating losses in our annual report on Form 20-F that are in excess of those disclosed in our unaudited quarterly earnings reports during the four quarters of fiscal year 2008. This correction will also increase operating losses for our first quarter 2009 beyond those listed in our press release dated June 9, 2009.
Secondly, some of our software products include rights to one year of maintenance to ensure that the software operates properly for the purposes sold. We previously deferred recognition of 10% of the software contract amount for a one-year period from the date of sale and recognized it as revenue after the one-year maintenance period had passed. Our management has determined that these amounts should instead be recognized evenly over the maintenance period. This correction will result in the accelerated recognition of revenues and associated costs of revenues but will not change the ultimate amounts we recognize per service contract.
Finally, our management has determined that it will further improve the accuracy of reflecting its costs of revenues through allocation on the basis of labor costs. We previously allocated our costs of revenues based on out-of-pocket expenses on projects. The change from allocation based on out-of-pocket expenses to allocation based upon labor costs will result in a more accurate estimate of costs of revenues by project, but is not expected to have a material change to the reporting of costs of revenues.
The anticipated accounting adjustments are intended to ensure adequate reserve of social security benefits for our employees and enhance the accurate recognition of revenue and associated costs to better reflect our expanding business and operational performance. The Company remains on track to continue the growth momentum and reaffirms our recent upward revision of 2009 revenue guidance of USD28 million to USD29 million, representing annual revenue growth of 38% to 40%.
About eFuture Information Technology Inc.
eFuture Information Technology Inc. (NASDAQ: EFUT) is a leading provider of software and services in China's rapidly growing retail and consumer goods industries. eFuture provides integrated software and services to manufacturers, distributors, wholesalers, logistics companies and retailers in China's front-end supply chain (from factory to consumer) market, especially in the retail and fast moving consumer goods industries. eFuture currently serves over 15 Fortune 500 companies, over 1,000 retailers and over 5,000 suppliers operating in China. eFuture is one of IBM's premier business partners in Asia Pacific and is a strategic partner with Oracle, Microsoft, JDA, Motorola and Samsung Network China. eFuture has more than 600 employees and 20 branch offices across China. For more information about eFuture, please visit http://www.e-future.com.cn/.
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