Tech Data has slashed $27m off its previously reported net profits after completing a ten-month independent probe into its UK and European accounting practices.
The world's second-largest distributor also announced it has set aside $55.6m to deal with an unrelated Spanish tax dispute as it finally filed its fiscal 2013 numbers with the US Securities and Exchange Commission.
Tech Data sent shockwaves through the industry last March when it announced it would have to restate some or all of its numbers for the previous three years after discovering "accounting improprieties" in its UK business.
At the time, it estimated the move would force it to reduce its previously reported net profit by between $25m and $33m.
The NASDAQ-listed firm announced this evening that it has completed an independent investigation to review its accounting practices throughout Europe. Its initial estimate on the shortfall appears to be spot on, as the distributor announced that it had reduced its consolidated net profit for the restated periods by a cumulative amount of $27m - or three per cent of the previously reported cumulative net profit for the period.
Tech Data said the restatement reflects adjustments relating to "an inadequate control environment" within its primary operating subsidiary in the UK and two other European subsidiaries.
More specifically, these relate mainly to errors arising from "improper vendor accounting, improper use of manual journal entries and improper recognition of foreign currency exchange transaction", it said.
In addition, the restatement also reflects other adjustments that were previously identified and considered immaterial, namely adjustments to "appropriately present sales of vendor warranty services and certain fulfilment contracts on an agency basis as net fees", among other things. More details of what the probe discovered can be found in its 10-K filing.
"The Audit Committee, its independent counsel and forensic accountants performed a thorough investigation of the company's accounting practices," said Charles Adair, chairman of Tech Data's Audit Committee.
"The Board of Directors is confident the company is addressing the problems that led to the restatement and has complete confidence in Tech Data's executive management team."
In an unrelated development, Tech Data estimated that the total exposure it faces in relation to an historic Spanish VAT dispute dating back to before 2004 could be around $55.6m.
"Although the company believes the Spanish subsidiary's defence to the assessments has solid legal grounds, and is continuing to vigorously defend its position by appealing to the Spanish Supreme Court, the risk that the assessments will be upheld has significantly increased," Tech Data said, adding that it recorded a charge of $41m in its fiscal 2013 consolidated statement of income to deal with the matter.
The giant distributor, which serves 120,000 resellers in over 100 countries and is ranked 119th on the Fortune 500, also reeled off a string of remediation actions it has taken following the conclusion of the accounting probe.
As well as parting ways with "certain personnel responsible for accounting improprieties", this includes implementing changes in various processes such as tools to document and review manual journal entries and new internal review and audit programmes. It has also appointed a chief ethics and compliance officer.
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