Amerco,
a consumer truck and storage rental company, has blamed
PricewaterhouseCoopers (PwC), which has been its auditor
for the last 24 years, for an erroneous bookkeeping
advice related to certain off-balance sheet entities
that finally led it to file for bankruptcy on June 20,
2003. Earlier in April, the company even filed a $2.6
bn lawsuit against its former auditor blaming it for
improper advice and irresponsible conduct.
The
controversy began in July last year when PwC asked Amerco
to consolidate SAC's accounts, an off-balance sheet
entity, on its financial statements. This resulted in
the restatement of the company's financial statements
for the years 2000 and 2001. The restatement wiped out
the company's 2001 net earnings by 92% to $1 mn and
increased the debt on its balance sheet by $558 mn to
$3.3 bn. In a later course of action, Amerco fired PwC.
The bitter duel between the two finally culminated into
a legal battle.
The
seeds of the trouble were sown in 1993 when Amerco wanted
to expand its self-storage operations. Amerco decided
to use the SPE (SpecialPurpose Entity) route so as to
avoid weighing down its balance sheet with debt. Certain
offbalance sheet entities were structured to help U-Haul,
Amerco's major subsidiary, to avoid putting real estate
losses on its books. Amerco now claims that the idea
came from PwC, which advised and reviewed the deals.
In its lawsuit against PwC, the company said that it
was assured by the accounting firm that the off-balance
sheet entities could be excluded from its financial
statements under US accounting rules. However, the company
alleges that in the wake of Enron's collapse and the
growing criticism of off-balance sheet transactions,
PwC reexamined the SPE accounting and found that it
erred in determining the required accounting for the
SPE. In its court filing, the company even quotes PwC's
advisor to Amerco, Terri M Hulse, saying, "It appears
that a mistake was made in the initial decision rendered
in 1995 and a restatement may be necessary."
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