Office Depot Analysis
Office Depot Financial Statements Restated
Office Depot Financial Statements Restated In March of 2011 Office Depot Inc. announced that it would be restating its 2010 financial results after the United States Internal Revenue Service denied its claim to carry back certain tax losses from prior years. “The expected impact of correcting the 2010 financial statements is to reduce full-year tax benefits of approximately $80 million; to change net earnings for 2010 from $33 million to a net loss of $46 million; and to increase the net loss attributable to common shareholders from $2 million or $0.01 per share to a net loss of $82 million or $0.30 per share.”(Office Depot Inc., 2011) The restatement is also expected to negatively impact 2011 cash flows by removing a $63 million current tax receivable. Other negative impacts from this restatement include deep declines in stock trading prices immediately following the announcement and class action lawsuits have now been filed against the company. The failure to disclose the risks associated to the tax filing could be seen as negligence on the part of Office Depot Inc. management as stated in the lawsuit filings, “The Complaint alleges that defendants failed to disclose the following material adverse facts: (i) that $80 million in carryback tax “benefits” Office Depot recognized during the Class Period for the second, third, and fourth quarters of 2010 were not permitted; (ii) that $63 million in current tax receivables associated with the carryback amount should not have been reported on the Company’s balance sheet on December 25, 2010; (iii) that Office Depot’s financial results were not reported in compliance with Generally Accepted Accounting Procedures (“GAAP”); (iv) that Office Depot’s financial statements overstated the Company’s assets and profits in violation of GAAP; and (v) that defendants overstated Office Depot’s business and financial metrics.” (Harwood Feffer, 2011) Management is
Office Depot Financial Statements Restated In March of 2011 Office Depot Inc. announced that it would be restating its 2010 financial results after the United States Internal Revenue Service denied its claim to carry back certain tax losses from prior years. “The expected impact of correcting the 2010 financial statements is to reduce full-year tax benefits of approximately $80 million; to change net earnings for 2010 from $33 million to a net loss of $46 million; and to increase the net loss attributable to common shareholders from $2 million or $0.01 per share to a net loss of $82 million or $0.30 per share.”(Office Depot Inc., 2011) The restatement is also expected to negatively impact 2011 cash flows by removing a $63 million current tax receivable. Other negative impacts from this restatement include deep declines in stock trading prices immediately following the announcement and class action lawsuits have now been filed against the company. The failure to disclose the risks associated to the tax filing could be seen as negligence on the part of Office Depot Inc. management as stated in the lawsuit filings, “The Complaint alleges that defendants failed to disclose the following material adverse facts: (i) that $80 million in carryback tax “benefits” Office Depot recognized during the Class Period for the second, third, and fourth quarters of 2010 were not permitted; (ii) that $63 million in current tax receivables associated with the carryback amount should not have been reported on the Company’s balance sheet on December 25, 2010; (iii) that Office Depot’s financial results were not reported in compliance with Generally Accepted Accounting Procedures (“GAAP”); (iv) that Office Depot’s financial statements overstated the Company’s assets and profits in violation of GAAP; and (v) that defendants overstated Office Depot’s business and financial metrics.” (Harwood Feffer, 2011) Management is
References: Gourley, M. M., & Lavender, J. E. (2010). Understanding Restatements of Financial Statements. (cover story). Corporate Governance Advisor, 18(4), 1-11. Harwood Feffer, L. (0004, November). Harwood Feffer LLP Encourages Investors Who Have Losses in Excess of $100,000 From Investment in Office Depot, Inc. To Inquire About the Lead Plaintiff Position in Securities Fraud Class Action Lawsuit Before the June 6, 2011 Lead Plaintiff Deadline. Business Wire (English). Office Depot Inc Restatement of 2010 Financial Results Conference Call - Final. (n.d). Fair Disclosure Wire (Quarterly Earnings Reports), Office Depot restates earnings after IRS denies tax benefit. (2011) USA Today. Retrieved October 29th 2011 from http://www.usatoday.com/cleanprint/?unique=1319998580667.