AOL Time Warner (AOL) shareholders have to wonder how many more cockroaches will come crawling out of America Online.

The multimedia conglomerate disclosed late Friday night that the

Securities and Exchange Commission

is questioning nearly $400 million inrevenue recognized by the America Online service over 2001 and 2002.

At issue is the accounting treatment of certain 2001 deals with German media giant



The disputed amount adds to the $190 million that AOL Time Warner, following a review of the online unit's advertising sales, said it was cutting from revenue AOL had recognized from 2000 to 2002. When AOLTime Warner announced that $190 million reduction last October -- twomonths after saying it was re-examining $49 million worth of transactions -- AOL Time Warner said it didn't anticipate any further restatements.

But now, investors must brace for the prospect of yet another restatement, one that would clip 9.5% from the $4.2 billion in advertising and commerce revenue AOL reported over 2001 and 2002.

With the latest disclosure, investor faith that AOL's accountingtroubles are behind it -- that the company is free to focus simply onold-fashioned underperformance -- seems misplaced. The cockroach theory of accounting problems -- that a single visible problem implies more in hidden corners -- is corroborated once again.

So shareholders can wonder whether any additional bad news will come out of the SEC's and the Justice Department's ongoing investigations of AOL's accounting and disclosure practices. And they can also try to figure out how much farther AOL Time Warner's sagging stock can sink.

Shares in AOL Time Warner fell 19 cents Friday to close at $11.35. The stock has fallen from a 52-week high of $24.99, but it's still above last year's lows of $8.70.

Goodbye to All That

The day after AOL Time Warner announced the $190 million restatement last October, its stock rose 7.5%, driven by investors' relief that the problem wasn't as bad as they feared.

At issue in the Bertelsmann case is certain advertising deals struck in 2001 while AOL Time Warner was negotiating with Bertelsmann over the dissolution of their partnership in AOL Europe.

Under an earlier version of the dissolution pact, Bertelsmann had the right to put its AOL Europe shares -- at a total price of $6.75 billion -- to AOL Time Warner in two stages. AOL Time Warner had the right to choose whether to pay for those shares in cash or in AOL Time Warner stock.

In separate agreements reached in March and December of 2001, thecompanies changed the earlier terms to specify a cash payment, rather than stock.

Meanwhile, "contemporaneously" with the agreements to pay in cash, says AOL Time Warner in its filing, the companies reached two separateagreements under which Bertelsmann agreed to purchase additionaladvertising from AOL Time Warner, valued at $125 million and $275 million.

The company and its auditors say the $396.4 million worth ofadvertising that ran in 2001 and 2002, virtually all of it at the AOL unit, should be recognized as revenue. The SEC staff says it believes "at least some portion of the revenue" should instead have been treated as areduction in the AOL Europe purchase price paid to Bertelsmann.

More to Come?

A restatement would make the unpleasant decline in AOL's onlineadvertising sales look even worse. Advertising and commerce revenue for AOL fell from $2.6 billion in 2001 to $1.6 billion in 2002. But subtracting out the disputed Bertelsmann deals -- which AOL Time Warner says made up AOL's biggest advertising transactions at the time -- as well a total of $400million in advertising charged to other units of AOL Time Warner, the trend becomes a decline from $2.24 billion in 2001 to $1.15 billion in 2002.

Even if AOL Time Warner and the SEC come to agreement over theBertelsmann deal, Friday's filing gently reminds the reader that therecould be more to come. The SEC is continuing to investigate "a range ofother transactions," primarily involving the AOL unit, says AOL TimeWarner.

Those transactions likely include, for example, deals with online real estate services firm



, alleged to be sham transactions designed to inflate the advertising revenue of both companies.

AOL Time Warner "may not currently have access to all relevantinformation that may come to light" in the SEC and DOJ investigations, the company said Friday. It is possible, says AOL Time Warner, that furtherrestatement of the company's financials may be necessary.