The ongoing federal inquiry into how Under Armour Inc. reported its earnings around 2016 shows how the government targets accounting practices involving the way in which companies record their sales.
Under Armour broached the topic of the investigation during its third-quarter earnings call earlier this month, saying it was cooperating with the U.S. Securities and Exchange Commission and the U.S. Department of Justice for more than two years. The company acknowledged the investigation amidst reporting by the Wall Street Journal about its apparent practice of moving revenues from one quarter to another, and of potentially encouraging retail customers to accept earlier shipments.
The company has insisted in its public statements so far that its reporting practices are kosher, saying in a statement Friday that “we firmly believe that our disclosures and our accounting practices have been entirely appropriate.”
The legality of certain earnings reporting practices might sometimes be ambiguous. But from the government’s perspective, the questions for Under Armour, and public companies relying on sales, often boil down to: did the company misstate its earnings or leave out information and, if so, were those misstatements or omissions material — that is, did they affect investors’ decision-making — and also, whether it was done