Exhibit 99.2
STATEMENT UNDER OATH OF PRINCIPAL FINANCIAL OFFICER
REGARDING FACTS AND CIRCUMSTANCES RELATING TO EXCHANGE ACT FILINGS
I, Oren G. Shaffer, state and attest that:
(1) I make the following statements to the best of my knowledge.
(2) I am unable to attest that:
o no covered report contained an untrue statement of material fact
as of the end of the period covered by such report (or in the
case of a report on Form 8-K or definitive proxy materials, as
of the date on which it was filed); and
o no covered report omitted to state a material fact necessary to
make the statements in the covered report, in light of the
circumstances under which they were made, not misleading as of
the end of the period covered by such report (or in the case of
a report on Form 8-K or definitive proxy materials, as of the
date on which it was filed).
(3) The facts and circumstances that prevent me from attesting to the
information in paragraph (2) above are as follows:
(a) Qwest Communications International Inc. ("Qwest" or the
"company") and its advisors are in the process of performing
internal analyses of its accounting policies, practices and
procedures, and internal controls. The results of this work are
expected to affect certain of the company's prior financial
information and disclosures, including information contained in
covered reports.
(b) Earlier this year the company and its board of directors
began an analysis of revenue recognition and accounting
treatment for certain of the company's optical capacity asset
sale transactions. That analysis since has been expanded, to
include all of the company's optical capacity asset sale
transactions from 1999 to 2001, and to include other company
accounting policies, practices and procedures and related
disclosures. Based on the work to date, the company has
determined that it has in some cases applied its accounting
policies incorrectly, that it incorrectly recognized revenue
and/or profit upfront in certain transactions, and that it
expects to restate its financial statements for prior periods.
(c) Qwest determined not to re-engage Arthur Andersen LLP as its
auditor and engaged KPMG LLP in May 2002. Since that time, KPMG
has been analyzing the company's financial information and has
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provided input regarding its preliminary views on certain Qwest
accounting policies, practices and procedures. Those views have
been, and are continuing to be, considered as a part of the
company's internal analysis. KPMG has not completed its
analysis. KPMG also is analyzing Qwest's internal controls, but
has not completed this work. As the company has disclosed, KPMG
has advised Qwest that it will not be able to complete a review
in accordance with Statement on Auditing Standards No. 71 ("SAS
71") of Qwest's financial statements for the quarter ended June
30, 2002 due to, among other things, the investigation being
conducted by the Division of Enforcement of the Securities and
Exchange Commission (the "Commission") and the issues that are
the subject of the investigation, the preliminary identification
of certain adjustments that the company believes may be
necessary to make in its historical financial statements, the
ongoing analyses by the company, its advisors and KPMG of the
accounting policies and practices of the company, and the
inability of Qwest's principal executive officer and principal
financial officer to certify the accuracy of the company's
filings. The company disclosed that it does not expect to file a
quarterly report on Form 10-Q for the quarter ended June 30,
2002 until such time as it has sufficient certainty of the
impact on this period of the expected restatement. At the time
it files this quarterly report, the company expects KPMG will
have completed its SAS 71 review.
(d) The company is in discussions with the staff of the
Commission concerning the company's accounting policies for
optical capacity asset sales transactions as indefeasible rights
of use ("IRUs") as described in paragraph (f) below. Those
discussions relate to the appropriateness of the company's
accounting policies for IRUs and the application of those
policies. If the company is unable to convince the Commission
staff of the appropriateness of one or more of the company's IRU
accounting policies and/or their application, further
adjustments to historical financial statements, including those
contained in covered reports, will be required.
(e) Since joining the company in July 2002, I have been involved
in the internal analyses by the company and its advisors.
(f) The internal analyses are not complete. I believe that the
internal analyses, now being directed by new management and
being informed by the views of new auditors, will result in a
conclusion that the restatement of financial information and
that the amendment of prior filed reports, including covered
reports, will be necessary. Subsequent to the date of this
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statement under oath, new issues may be raised by the company's
internal analyses, or by KPMG. Issues currently under
consideration for potential restatement and/or enhanced
disclosure in covered reports include, but are not limited to,
the following:
(i) IRUs. The company analyzed its application of the
revenue recognition policies approved by its previous
auditor, Arthur Andersen, with respect to optical capacity
asset sales. The company, in consultation with KPMG,
currently is analyzing the application of the company's
accounting policies to all of the company's optical capacity
asset sales transactions, and the appropriateness of the
accounting policies themselves. In addition, I understand
that the company's accounting policies for IRUs generally
are under review by the Commission and may be determined to
be inappropriate. Based on the work accomplished to date,
the company has preliminarily concluded that its revenue
recognition policies were incorrectly applied to optical
capacity asset transactions which totaled approximately
$1.16 billion in recognized revenue in the period from 1999
through 2001, and which represented approximately 18 percent
of the company's optical capacity asset transactions in this
period. The company may ultimately conclude that it
recognized revenue inappropriately with respect to the
transactions identified in the initial analysis and in other
optical capacity sales and that the amount of the additional
revenue adjustments may be significant. For example, if the
company were to determine that certain of the policies as
applied to all optical capacity asset sales were
inappropriate, the company may be required to restate its
financial statements with respect to optical capacity asset
sales affected by such policies, which could be all optical
capacity asset sales in the relevant periods.
(ii) Equipment Sales. In connection with certain equipment
sales, the company may have inappropriately recognized
revenue and/or profit that should have been deferred or
otherwise recognized in another quarter. The company
adjusted for these transactions in the fourth quarter of
2001 by reducing revenues and/or profits in an amount equal
to that which had been determined at the time of completing
the 2001 financial statements as having been inappropriately
recognized upfront as a result of these transactions. The
company believes that these transactions should be restated
to defer revenues and/or profit that were recognized when
the transactions were initially recorded, and to move the
fourth quarter 2001 adjustments to the appropriate quarters.
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(iii) Qwest Dex ("Dex"). Prior to 1999, the company
recognized revenues and expenses relating to its Dex
directory publication business using the deferral and
amortization method, under which revenues and expenses were
recognized over the lives of the directories, which up to
that time were consistently 12 months. Effective as of the
first quarter of 1999, Dex changed to the point of
publication method of accounting, under which the company
recognized revenues and expenses at the time the directory
was published, and received a preferability letter from its
auditors at the time, Arthur Andersen. In consultation with
KPMG, the company recently has reassessed the point of
publication method and has concluded, based on that
reassessment and on comments the company received from the
Commission staff in August 2002, that directory revenues
should be recorded using the deferral and amortization
method of accounting. The company expects that it will apply
that method when the company and KPMG have completed all of
their analyses.
(iv) Telecommunications Services. During 2000 and 2001 the
company received services from third party
telecommunications providers and paid such providers but did
not properly record the cost associated with certain such
services. The company is continuing to analyze these items
to quantify the amount of these understated costs.
(v) Other. Once the company completes the analyses being
undertaken by the company and its advisors of other
accounting policies and practices, and of internal controls,
further adjustments will likely be required relating to
prior periods, including those included in covered reports.
The company has not concluded sufficient analysis to
quantify these adjustments.
(g) Based on the internal analyses performed to date, I believe
that the company needs to enhance certain internal controls,
which are being analyzed by Qwest and its advisors.
(h) In light of the matters and uncertainties described above,
other than as set forth above I am not able at this time to
express a view concerning the accuracy and completeness of
Qwest's covered reports.
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(4) I have reviewed the contents of this statement with the company's
audit committee.
(5) In this statement under oath, each of the following, if filed on or
before the date of this statement, is a "covered report":
o the Qwest Annual Report on Form 10-K for the fiscal year ended
December 31, 2001, filed with the Commission on April 1, 2002;
o all reports on Form 10-Q, all reports on Form 8-K and all
definitive proxy materials of Qwest filed with the Commission
subsequent to the filing of the Form 10-K identified above; and
o any amendments to any of the foregoing.
/s/ OREN G. SHAFFER Subscribed and sworn to before me
- ----------------------------------- this 16th day of August, 2002.
Oren G. Shaffer
Dated: August 16, 2002
/s/ Jennifer R. Isaacs
---------------------------------
Notary Public
My commission expires: 6/21/06
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