Xerox has rejected the US Securities and Exchange Commissions (SEC) criticism of the way it accounts for lease transactions, as making no material difference.

In a regulatory filing Xerox said that the SEC office of the chief accountant had questioned the firms method of booking leases for not following the methodology required under accounting rules. The SEC has been investigating whether Xerox has booked too much revenue initially, rather than over the full term of the leases.

However, a spokeswoman for Xerox said: The method we use complies with financial standards. If you use either methodology it would not make a material difference to the outcome.

The news came as Xerox said it planned to raise a further 347m ($500m) of capital as part of its ongoing programme to restore financial muscle and increase liquidity.
The company said that the additional capital for general corporate purposes including the payment of indebtedness use would be raised through senior notes due in 2009.

Last year Xerox announced that GE Capital was to become its primary source of equipment financing in Canada (PrintWeek, 23 November).

Last week the company said that it had received 222m ($340m) in finance from GE Capital in addition to the 579.5m it received last month. This increased Xeroxs cash position to approximately 2.7bn, following the repayment of 763m of debt that had matured this quarter.

But despite the increased capital, investor service Moodys said it had placed Xerox Corporation shares under review for a possible downgrade.

Story by John Davies