UTi Worldwide Inc. said it will restate its financials for the fiscal year ended January 31, 2007 to correct errors in tax accounting — specifically, the incorrect application of FAS 5, Accounting for Contingencies.
It was unclear at press time exactly what contingencies were not properly accounted for. The only one mentioned in the company’s most recent quarterly financial statements, for the quarter ended October 31, 2007, was a minor, $15,000 dispute with the South African government. UTi did not return a call seeking clarification by press time.
In Securities and Exchange Commission SAB No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements, two methods of analyzing such errors are discussed. Under one of them, the “rollover” method, UTi’s errors are not material to previously reported net income, the supply chain logistics company said.
However, UTi conceded that the errors are material to its fiscal 2007 financial statements when using the “iron curtain” method.
While the rollover method, which is more prevalent, recognizes that prior errors may be offset or reversed in the current quarter or year, the iron curtain method does not allow that, according to TheCorporateCounsel.net.
As a result, the company will reduce earnings per diluted share for fiscal 2007 by 4 cents.
The restatement will be reflected in UTi’s annual report for the fiscal year ended January 31, 2008, which will now be delayed, but not beyond the 15-day extension period, the company said. It stressed that the adjustments will not materially affect the company’s current cash position or financial condition.
UTi also said it will make certain immaterial adjustments to its previously issued financial statements for the fiscal years ended January 31, 2005 and 2006. These changes will reduce diluted earnings per share by 1 cent for fiscal 2006 and 2 cents for fiscal 2005.