Audit of Homestore Boosts Loss in 2000

Homestore.com, the Westlake Village-based Internet real estate company, said Tuesday that it completed an internal audit of past financial statements and determined that $41.4 million of revenue was improperly recorded in 2000.

The restatement caused the company’s loss for that year to balloon 27%, the firm said.

Homestore, whose founder and chief executive, Stuart H. Wolff, resigned in January following disclosures of improper accounting, said the total reduction in revenue for 2000 was within the range of $39 million to $45 million the firm had previously estimated.

The company said its net loss for 2000 increased to $146.1 million, or $1.83 a share, from a previously reported loss of $115.2 million, or $1.44 a share. The new revenue figure is $181.3 million.

The news was reported after stock trading ended Tuesday. In regular Nasdaq trading, Homestore shares fell 6 cents to $1.23.

The firm’s investigation revealed that in 2000, revenue totaling $36.4 million should have been recorded as barter transactions. “It was also determined that there was insufficient support to establish the fair value of these barter exchanges,” Homestore said.

In addition, the firm said, the investigation showed that the shipment of certain software products recorded as $5 million in 2000 “did not meet all revenue recognition requirements.”

Michael Long, who took over for Wolff as CEO, said that although the company still must restate its 2001 quarterly reports later this month, he is satisfied that the accounting inquiry is closed.

Meanwhile, Los Angeles-based Internet advertising agency L90 Inc. said accountants would review two transactions in the second and third quarters of 2001 between the company and Homestore.

The firm’s internal audit committee is investigating whether L90 overstated revenue for the transactions, and if there are additional transactions of a similar nature. The committee also is examining barter transactions, the company said.

Shares of L90 rose 3 cents to $1.21 on Friday, the last day they traded. The Nasdaq Stock Market, which halted trading pending additional information from L90, said trading would resume today.

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Bloomberg News was used in compiling this report.