Orion Energy Systems, Inc. (NYSE Amex: OESX), a leading power technology enterprise, announced today preliminary financial results for its fiscal 2012 third quarter ended December 31, 2011 and that it is changing its accounting treatment for sales of its solar photovoltaic systems. This change in accounting treatment will affect its historical financial results for the third and fourth quarters of fiscal 2011, including the fiscal 2011 year end financial statements, and the first and second quarters of fiscal 2012, as well as prospectively. Orion is working together with its independent registered public accounting firm to re-evaluate, re-audit and restate its fiscal 2011 financial statements and to complete the change in accounting treatment for the quarterly periods mentioned above, as well as for Orion’s fiscal 2012 third quarter and future periods. The Company has engaged its current independent registered public accounting firm to re-audit and restate its fiscal 2011 year end financial statements rather than its prior independent registered public accounting firm which previously audited such statements.
Orion, together with its independent registered public accounting firm, concluded that generally accepted accounting principles require that revenue be recognized from sales of its solar photovoltaic systems using the percentage-of-completion method rather than based upon multiple deliverable elements. Orion’s current method of accounting for sales of its solar photovoltaic systems requires it to recognize revenue in two stages (i) when the title to the products has been transferred and (ii) when the service installation is complete.
The percentage-of-completion method, however, recognizes revenue over the life of the project as materials are installed and are permanently attached or fitted as required by engineering designs. The percentage-of-completion method requires revenue from the delivery of products to be deferred and the cost of such products to be capitalized as a deferred cost and current asset on the balance sheet. The difference between the percentage-of-completion method and the multiple deliverable elements method is a question of timing.