Flowserve Corporation (FLS), a maker of industrial flow management equipment, revealed it has made multiple errors in how it allocates taxes for several of its less than wholly-owned consolidated joint ventures in a foreign jurisdiction.

In the third quarter of 2023, the Flowserve recorded an adjustment of $3.6 million in net earnings attributable to noncontrolling interests to correct the cumulative impact of the errors, resulting in a reduction of reported net income in the current period.

The adjustment is:

—6.8% of net income for the quarter ended September 30, 2023
—56.2% of net earnings attributable to noncontrolling interests for the quarter ended September 30, 2023

Flowserve says the errors are immaterial and is not correcting prior period financial statements containing the errors.

Separately, the company also identified a $6.4 million accounting error related to certain operating real estate leases that have escalating rent payments which were not correctly recorded on a straight-line basis.

Approximately $5.8 million of the error impacted Flowserve’s financials prior to adoption of ASU No. 2016-02, Leases (Topic 842) in 2019 and the remaining amount impacted each period subsequent to adoption.

To correct the cumulative impact of the error Flowserve recorded an adjustment of $6.4 million of incremental operating lease expense in the third quarter of 2022 ($5.5 million classified as SG&A and $0.9 million classified as COS), with the offsetting adjustment to reduce operating lease right-of-use assets on its balance sheet for the period ended September 30, 2022.

There was no impact to Flowserve’s cash flows as a result of the correction of the error.