Correction of Fuji Xerox Misstatement in Prior Period Financial Statements

Fuji Xerox is a joint venture between Xerox Corporation and Fujifilm Holdings Corporation (“Fujifilm”) in which Xerox holds a noncontrolling 25% equity interest and Fujifilm holds the remaining equity interest. In 2017 Fujifilm publicly announced it had formed an independent investigation committee ("IIC") to conduct a review of the appropriateness of the accounting practices at Fuji Xerox’s New Zealand subsidiary related to the recovery of receivables associated with certain bundled leasing transactions that occurred in, or prior to, Fuji Xerox’s fiscal year ending March 31, 2016.

The IIC’s review, completed during the second quarter 2017, identified total aggregate adjustments to Fuji Xerox's financial statements of approximately JPY 40 billion (approximately $360 based on the Yen/U.S. Dollar spot exchange rate at March 31, 2017 of 111.89). The adjustments identified by the IIC primarily related to misstatements at Fuji Xerox's New Zealand subsidiary as well as their Australian subsidiary and certain other adjustments. We determined that our cumulative share of the total aggregate adjustments identified as part of the investigation was approximately $90 and impacted our fiscal years 2009 through 2017.

In the second quarter 2017, we determined that the misstatements to our Equity in net income of unconsolidated affiliates in prior years and the first quarter of 2017 identified through the IIC's review were immaterial to our previously issued financial statements. However, we concluded that the cumulative correction of these misstatements would have had a material effect on our 2017 consolidated financial statements. Accordingly, we revised our previously issued consolidated financial statements for the first quarter of 2017. The effect of the revision on our previously issued financial statements is provided in the tables below. Amounts throughout the consolidated financial statements and notes thereto have been adjusted to incorporate the revised amounts, where applicable.

Refer to Note 10 - Investment in Affiliates, at Equity for a discussion regarding the correction of incremental misstatements and adjustments identified in 2018 and corrected by Fuji Xerox as part of their reported results for the quarter ended March 31, 2018 (our first quarter).

Revised Condensed Consolidated Statements of Income

The following tables reconcile selected lines from the company’s first quarter of 2017 Condensed Consolidated Statements of Income from the previously reported amounts to the revised amounts:



	Three Months Ended March 31, 2017
	As Reported		Adjustment		As Revised
Equity in net income of unconsolidated affiliates	$	16	$	24	$	40
Income from Continuing Operations	24		24		48
Net Income	18		24		42
Net Income Attributable to Xerox	16		24		40

Net income from continuing operations attributable to Xerox	$	22	$	24	$	46

Basic Earnings per Share:
Continuing operations	$	0.07	$	0.10	$	0.17
Total	$	0.05	$	0.09	$	0.14

Diluted Earnings per Share:
Continuing operations	$	0.07	$	0.09	$	0.16
Total	$	0.05	$	0.09	$	0.14

Revised Condensed Consolidated Statements of Comprehensive Income

The following tables reconcile selected lines from the company’s first quarter of 2017 Condensed Consolidated Statements of Comprehensive Income from the previously reported amounts to the revised amounts:



	Three Months Ended March 31, 2017
	As Reported		Adjustment			As Revised
Net Income	$	18	$	24		$	42
Net Income Attributable to Xerox	16		24			40

Translation adjustments, net	$	136	$	(3	)	$	133
Other Comprehensive Income, Net	170		(3		)	167
Other Comprehensive Income, Net Attributable to Xerox	169		(3		)	166

Comprehensive Income, Net	$	188	$	21		$	209
Comprehensive Income, Net Attributable to Xerox	185		21			206

Revised Condensed Consolidated Statements of Cash Flows from Operations

The revision did not have an impact on the company’s operating cash flows. The following table reconciles selected lines from the company’s first quarter of 2017 Condensed Consolidated Statements of Cash Flows from the previously reported amounts to the revised amounts:



	Three Months Ended March 31, 2017
	As Reported			Adjustment			As Revised
Cash Flows from Operating Activities:
Net Income	$	18		$	24		$	42
Income from Continuing Operations	24			24			48

Undistributed equity in net income of unconsolidated affiliates	$	(16	)	$	(24	)	$	(40	)