The Royal Ahold's, the world's third largest retailer, case of accounting malfeasance, lends weight to the growing concern over the way retailing industry accounts for supplier rebates.
Royal
Ahold, world's third largest retailer, becomes the latest company
to admit accounting shenanigans at its US subsidiary, US Foodservice.
The Dutch retailer has confessed that its financials for 2000
and 2001 were overstated by about $500 mn.
During
the last two years, after the collapse of Enron the cases of accounting
abuse have been surfacing in the US one after other. Last year
alone, a record 330 companies admitted to have overstated their
earnings, prompting the SEC to open 2,200 investigations, involving
stretching or breaking accountancy rules.
Behind
most of these cases lies the issue of revenue recognition (which
involves `when' and `how much' to recognize). According to an
estimate by Huron Consulting Group, a US-based forensic accounting
firm, booking revenue from the sale of products or services before
they are delivered is the major reason for financial restatements
by publicly listed companies in 2002. Ahold's case is no different.
the preliminary investigations by the SEC suggest revenue recognition
was one of the issues behind the accounting scandal at the company's
US food distribution subsidiary. |
