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Internet retailer has also made headlines over SEC subpoenas of journalists.
Stephen Taub, CFO.com | US
February 28, 2006
Controversial online discount retailer Overstock.com Inc. announced that it will restate its financials for the four years ended 2005 to correct an error related to accounting for freight costs.
In a regulatory filing, Overstock disclosed that the misstatements stem from its practice of expensing the cost of delivering freight to its warehouses immediately, rather than capitalizing these costs as a component of inventory and expensing them as the inventory is sold.
The company will decrease the net loss for each annual period affected and increase inventory at September 30, 2005, by about $3.5 million. Overstock added that the revisions will not affect historical or future cash flows.
Overstock also concluded that as of December 31, 2005, a material weakness existed, regarding its failure to maintain effective controls over accounting for inbound freight costs as a component of inventory costs. The company stressed, however, that as part of the year-end closing process, it implemented enhanced procedures and controls to ensure the accuracy and completeness of such accounting.
Meanwhile, former Overstock chairman Patrick Byrne has accused hedge fund Rocker Partners and research firm Gradient Analytics of engaging in a conspiracy to drive down the company's share price.
Christopher Cox, chairman of the Securities and Exchange Commission, has admonished the SEC's Division of Enforcement regarding subpoenas the division sent to several journalists, seeking documents related to Overstock and Byrne's accusations.
Cox did leave open the possibility that in the future, he might support subpoenas of the press, but only after the matter is considered by the SEC commissioners themselves.