Talk about making a good first impression. During an internal review, the new finance team at Par Pharmaceutical uncovered accounting errors that will force the drug maker to restate financial results for fiscal years 2004, 2005, and the first quarter of 2006.
The restatements, which will also delay the filing of Par’s second quarter report, are tied to an understatement of accounts receivable reserves related to delays in recognizing customer credits and uncollectible customer deductions.
Par officials stressed that the accounting errors were discovered following the March 16 appointment of chief financial officer Gerard Martino, and the hiring of other key finance staff, according to a company statement. The errors are “inadvertent,” insisted the release.
It is expected that the restatement will force Pars to reduce revenues by up to $55 million.
Further, because the company has profit sharing arrangements with several of its business partners, the overstatement of revenues has resulted in Par overpaying its business partners in some instances. As a result, officials said the company will try to recover from those partners a share of profits from products included in the overstated revenues. “However, Par is unable to estimate at this time the amount of the overstated revenues that may be recovered,” warned executives.