The Securities and Exchange Commission has turned a preliminary investigation of Halliburton Co. construction accounting into a formal probe, the company said on Dec. 19. In May, Halliburton said the SEC had begun a preliminary investigation of its accounting on cost overruns on construction projects. Those jobs were performed by Halliburton's Kellogg Brown & Root subsidiary.
Under a formal investigation, the SEC has the ability to subpoena third parties to gain access to information it is seeking.
"We see it as a step forward towards resolution," a Halliburton spokesperson says. The company says that to its knowledge, the SEC probe hasn't been broadened beyond the construction accounting issue.
SEC spokesman John Nester declined comment, noting that the commission has a policy of neither confirming nor denying the existence of an investigation.
In announcing the preliminary investigation in May, Halliburton said it "believes that it has accounted for construction claims and change orders in accordance with generally accepted accounting principles applicable to the construction industry."
Halliburton also said that before 1998, it didn't record construction claims and change orders as revenue or accounts receivable before they were negotiated with the customers. But in 1998, it disclosed in its annual SEC financial filing that it had posted losses on projects related to claims and change orders that it didn't feel its customers would agree to.
Halliburton also said that in 1998 it began to record claims and change orders in revenue and accounts receivable when it expected to be able to collect that money from customers.
The company said it has continued to account for such items the same way since 1998, but hasn't recorded a profit on a project "where an unapproved claim or change order has been recorded in revenue."