Risk Management

Inventory Error Spurs Restatement

As per usual in such cases, a lawyer is looking into filing claims against Opnext concerning possible securities violations.
Stephen TaubFebruary 15, 2008

After finding errors in the valuation of inventory consigned to one of its contract manufacturers, Opnext, which makes data-receiving devices for the communications industry, reported it will restate its results for the past two fiscal years.

The errors were uncovered in the course of preparing its financial statements for the quarter ended December 31, the company stated. The errors caused misreporting of Opnext’s inventory and trade payables balances, cost of goods sold, and others expense.

The items were not properly reported for the fiscal years ended March 31, 2006, and March 31, 2007, according to the manufacturer and designer. A few quarterly periods in each of those years were also affected. The company estimated its net income was overstated by about $1.8 million for the 2007 fiscal year and its net loss was understated by about $1 million for the 2006 fiscal year.

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As often happens, the restatement announcement triggered a lawsuit. The law offices of Howard G. Smith announced they are investigating potential claims against Opnext concerning possible securities violations by the company relating to its restatement.

The investigation concerns the company’s announcement that during these periods “errors occurred in the valuation of inventory consigned to one of its contract manufacturers and that, as a result, the Company’s inventory and trade payables balances and the reported amounts of cost of goods sold and other income expense, net, were not properly reported,” the law firm stated. Opnext representatives could not be reached at press time.

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