Overstock.Com: Unusual/Conflicting Accounting Principles Impact

1563 Words 7 Pages
Abstract
Overstock.com, also known as O.co, with headquarters in Salt Lake City, Utah was founded in 1999 by Patrick S. Byrne, its CEO and Chairman of the Board of Directors. Byrne "recognized the potential in liquidating excess inventory through the Internet. Up until then, consumers had relied upon outlet centers with crowds and limited product selections for finding bargains, and small retailers found little access into the world of closeout merchandise" (O.co, 2010). Meantime, the art of online shopping seemed to be skyrocketing. In 1999 Overstock.com reported a "$1.8 million in annual revenue to over $1 billion in revenue in 2010. Overstock.com is a major online retailer offering a wide variety of high-quality, brand name
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Overstock.com should have restated its financial reports to recognize income when those offsetting costs and reimbursement amounts were actually earned by the company in those previous reporting periods. Instead, the company improperly recognized income as those amounts were collected in future accounting periods (Q4 2008 to Q3 2009) on a non-GAAP cash basis. In one instance, Overstock.com improperly reported Q4 2008 profits, even though the company should have reported a loss under accounting rules" (Antar, 2010). "The Big O also admitted that it 'incorrectly amortized the expense under the plans'. While they were at it, they threw a bunch of other corrections that were '[not] material either individually or in the aggregate,' as the saying goes" (Newquist, 2010). For errors in accounting to reach this scale, it is inevitable to see that there had to have included a number of the company's top level officials in both the accounting and executive departments. The bottom line is that the accounting department has the responsibility to provide not only to managers but also to investors the necessary information to make the correct decisions. The management of a company is responsible to for the accuracy of the financial

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