Veritas Software Corp. said yesterday that it is erasing $20 million it had improperly booked as revenue as part of a questionable advertising deal it made with Dulles-based America Online Inc. in 2000.

Veritas acknowledged it had recorded $20 million in software license fees that it received from America Online and then, essentially, purchased $20 million of advertising on AOL. The effect of the deal was to artificially boost reported revenue at both Veritas and America Online, sources said.

Veritas received a subpoena last year from the Securities and Exchange Commission as part of a broad, ongoing investigation into AOL's bookkeeping practices before and after its merger with Time Warner in January 2001. AOL Time Warner Inc., which is cooperating with the probe, restated $190 million in America Online revenue last fall after scrutinizing an array of ad deals, including transactions with Veritas, according to sources familiar with the probe.

The Veritas deal with America Online illustrates the sleight of hand that pumped up revenue but later came to be viewed with suspicion by federal investigators and others as Internet firms that appeared to be making money went broke.

Veritas is one of the world's biggest software firms, generating more than $1.5 billion in revenue by selling software and services that help companies store and protect data.

According to the company, its deal with America Online involved multiple steps. First, AOL purchased $50 million in software from Veritas. Then Veritas bought $20 million in advertising on America Online. Next, Veritas booked all $50 million of the money it received from AOL as revenue, even though $20 million of that money was given back to AOL. Finally, Veritas recorded the $20 million in ads it bought on AOL as an expense on its books over two quarters.

Since the various transactions were linked, both companies effectively generated revenue by swapping cash payments.

Veritas said yesterday that it "will restate its financial results to reflect that $20 million of license and support fees paid by AOL will not be recognized as revenue, and $20 million of advertising services paid to AOL will not be recorded as an expense."

"The periods affected by the restatement will include fiscal years ended December 31, 2000 and 2001, and quarters ended December 31, 2000 through September 30, 2002," the company said.

The effect of the restatement for 2000 will be to reduce previously reported revenue of $1.2 billion by $17 million, or 1.4 percent, and to increase a previously reported net loss of $620 million by $7 million, or 1.1 percent, the company said in a statement.

For 2001, previously reported operating expenses of $1.8 billion will be reduced by $13 million, or 0.7 percent, and a previously reported net loss of $651 million will be reduced by $8 million, or 1.2 percent. For the nine months ended Sept. 30, 2002, previously reported revenue of $1.1 billion will be reduced by $1 million, or 0.1 percent, and previously reported net income of $107 million will be reduced by less than $1 million, or 0.9 percent.

There are likely to be additional announcements of restatements by companies that entered into ad deals with America Online, according to sources familiar with the SEC probe, because companies would rather restate results than be sued by the SEC and forced to do so.