Avid 2014 Annual Report Download - page 26

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In the second quarter of 2013, we determined that we needed to restate revenue for millions of customer transactions for interim
and annual periods ended during the periods from January 1, 2005 to September 30, 2012 (the Restatement Periods) to correct
errors in our historically issued financial statements. In addition, certain other adjustments arose in the Restatement Periods that
were deemed material and were adjusted in the restated financial statements for the Restatement Periods. The errors in the
misapplication of GAAP over revenue recognition and the other errors identified resulted from several control deficiencies that
were in existence during the Restatement Periods. These control deficiencies individually and when aggregated represent material
weaknesses in our internal control over financial reporting and, as a result, we concluded that our internal control over financial
reporting and our disclosure controls and procedures were not effective as of December 31, 2014.
As described in Part II, Item 9A, “Controls and Procedures,” of this Annual Report on Form 10-K, due to the limited time
between (i) the completion of the restatement and related filing of the Annual Report on Form10-K for the year ended December
31, 2013 and the Quarterly Reports on Form 10-Q for the quarterly periods in 2014 and (ii) management’s assessment of the
effectiveness of internal controls over financial reporting as of December 31, 2014, we have not had sufficient time to fully
remediate the aforementioned deficiencies and/or there was insufficient passage of time to evidence that the controls that were
implemented during 2014 were effective.
While we continue with our efforts to remediate the identified weaknesses, we cannot assure you that our remediation efforts will
be adequate to allow us to conclude that such controls will become effective during fiscal year 2015. We also cannot assure you
that additional material weaknesses in our internal control over financial reporting will not arise or be identified in the future. We
intend to continue our control remediation activities and also to continue to improve our operational, information technology,
financial systems, and infrastructure, procedures and controls, as well as to continue to expand, train, retain, and manage our
personnel who are essential to effective internal control. In doing so, we will continue to incur expenses and expend management
time on compliance-related issues.
If we fail to successfully remediate our material weaknesses and implement appropriate controls, we may not be able to prevent or
detect a material misstatement in our financial statements on a timely basis or at all. Such misstatements could result in a future
restatement of our financial statements, could cause us to fail to meet our reporting obligations, or could cause investors to lose
confidence in our reported financial information, leading to a decline in our stock price or litigation. Furthermore, our reputation
could be harmed and our customers’ and partners’ confidence in us may be impaired, all of which could damage our business. For
a discussion of the material weaknesses, please see Part II, Item 9A, “Controls and Procedures,” of this Form 10-K.
We cannot assure you that our financial statement preparation and reporting processes are or will be adequate or that
future restatements will not be required.
While we have, following the restatement, significantly changed and enhanced our regular financial statement preparation and
reporting processes (as described elsewhere in this report), as of the filing date of this report, previously identified material
weaknesses in our internal control over financial reporting have not have been fully remediated and we continue to:
• make changes to our finance organization;
• adopt new accounting and reporting processes and procedures;
• enhance our revenue recognition and other existing accounting policies and procedures;
• introduce new or enhanced accounting systems and processes; and
• improve our internal control over financial reporting.
We cannot assure you that the changes and enhancements made to date, or those that are still in process, are adequate, will operate
as expected, or will be completed in a timely fashion (if still in process). As a result, we cannot assure you that we will not
discover additional errors, that future financial reports will not contain material misstatements or omissions, that future
restatements will not be required, that we will be able to timely complete our remaining SEC filings for periods subsequent to this
report, or that we will be able to stay current with our reporting obligations in the future.
We have been named in class action lawsuits related to the circumstances that gave rise to our extended filing delay and
recent restatement, and such delays and restatement continue to create the risk of further litigation against us, which
could be expensive and could damage our business.
We and certain of our former executive officers have been named in class action lawsuits relating to our recent restatement.
While we have reached an agreement in principle to settle the class action lawsuit, that settlement may not become final and the
class action and any future litigation or action that may be filed against us, our current or former directors or officers may be time