Accounting errors were not in Spotify’s favour

Deficits higher than thought as streaming giant prepares for initial public offering.

LONDON— As Spotify prepares for an initial public offering, the musicstreaming site has flagged a number of errors in its previous results, revealing a significant increase in losses. According to accounts filed Wednesday in Luxembourg for Spot- ify Technology SA, over 2015 the company actually posted a further loss before tax of € 61.8 million ($90 million), on top of an original deficit of € 164.8 million.

In 2014, Spotify also suffered further losses of € 23.9 million.

The accounting errors come as Spotify showed strong growth in revenues and active users over 2016. Annual revenue increased to € 2.9 billion, up 55 per cent from a year earlier. However, the company posted a net loss of € 539.2 million, compared with a loss of 231.4 million in 2015.

The world’s largest music-streaming service is preparing to go public with a listing on the New York Stock Exchange and has hired Morgan Stanley, Goldman Sachs Group and Allen & Co. to advise it on the process.

Premium revenue from paid subscriptions increased 52 per cent and ad revenue was up 50 per cent, while the number of monthly active users and paying subscribers increased to 126 million at the end of 2016, up from 91 million a year earlier. The company has now amassed140 million global monthly active users, according to a separate statement.

Spotify attributed the 2016 loss to the cost of debt and the impact of foreign exchange movements. The company borrowed an additional $1.3 billion in March 2016.

A private share sale in March gave Spotify a valuation of $17 billion, according to a person familiar with the deal, who asked not to be identified because the matter was private.

Spokespeople for Spotify and EY, Spotify’s auditor, declined to comment.

Companies that are preparing to list are expected to tighten up their accounting and corporate governance before becoming a public company.

Charges on credit cards, payment processing issues, understatements on royalties and incorrect calculations for management bonuses were among some of the reasons for the errors, according to the accounts.