Hewlett-Packard could be forced into a full disclosure this month of the accounting improprieties it claims to have unearthed at Autonomy, the Cambridge software firm whose value it has slashed in half following a £6.2bn acquisition last year.
HP, which bought Autonomy as part of an ill-fated attempt to move away from low-margin hardware into high-growth software sales, will have to use its annual filing, expected on 17 December, to "tell the public in clear language what all the fuss has been about", according to a former US Securities and Exchange Commission (SEC) adviser, Tom Selling.
The value of Autonomy on HP's books was cut by £3.1bn in late November, and Selling said investors were now entitled to "know what HP's management knows".
HP's annual filing is likely to be closely watched by the incoming interim SEC chair, Elisse Walter, who is currently a commissioner at the US financial markets watchdog and is considered a candidate for the permanent position.
In a statement, the company said: "HP will disclose the relevant material and appropriate level of detail as required under SEC rules."
Regulations state that the risks and issues affecting the company must be outlined in detail in the section headed Management's Discussion and Analysis of Financial Condition and Results of Operations, known as MD&A.
SEC guidance is that the report should give investors the chance to see the company "through the eyes of those who manage that business".
HP's case that Autonomy management misled investors and potential buyers centres on hardware sales classed as software, and how Autonomy reported revenues from resellers and digital archive hosting deals.
However, the company has produced almost no numbers to back up its case. HP's chief executive, Meg Whitman, who has asked accountants at PricewaterhouseCoopers to carry out a forensic review, has refused to name specific deals, members of staff or other companies involved.
Autonomy's founder and former chief executive, Mike Lynch, who on Tuesday launched a website to rebut HP's claims, says he "utterly rejects" the allegations and has asked for details of how HP arrived at its £3bn figure.
Selling, a former fellow to the SEC's office of the chief accountant, urged the SEC to "hold HP's feet to the fire" to ensure it made a full disclosure.
"SEC rules will eventually compel HP to tell the public in clear language what all the fuss has been about," he wrote on his blog. "In this instance, such a statement can only mean that investors are entitled to the following specifics: what management knows as of the date of filing; how they know it and when they came to know it; how it changes expectations of future profitability and liquidity (quantified to the extent possible)."
Management will have to outline the actions it is taking to mitigate the damage. HP has asked the SEC and the UK's Serious Fraud Office to investigate. Despite suggestions that it could take advisers and former Autonomy management to court, HP has yet to file a lawsuit relating to its claims.
Lynch launched AutonomyAccounts.org on behalf of the former Autonomy management team "as a public point of contact for Dr Mike Lynch and other former managers at Autonomy with the wider world". Among the first postings are an open letter published last week by Lynch and a timeline of his company's achievements.
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