Continuing General Accepted Accounting Principles Violations of Overstock.Com

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Continuing General Accepted Accounting Principles Violations of Overstock.com

Abstract
Following General Accepted Accounting Principles (GAAP) and filing correct quarterly and annual reports are one of the most important parts of running a successful business. Not every business follows these given guidelines and wonders, why all of a sudden they are in more trouble than if they would have stated their data properly, even if it shows a slow but steady failure of the business. Overstock.com is one of these companies. In 2008 they revealed consumer credit and reimbursement accounting errors resulting in $8.2 million of declared collected losses in previous reporting time intervals. Those consumer reimbursement and credit errors also caused Overstock.com to underestimate earned income outstanding for equalizing costs and compensations. Instead, Overstock.com inappropriately documented income from its partners using a non-Generally Accepted Accounting Principle money basis. This caused the financial statements of the previous year’s to be incorrect and needed to be re-stated. Although Overstock.com filed current and re-stated financial statements with the Securities and Exchange Commission, their inaccurate data has causes discrepancies in future filing periods. Until today Overstock.com has not been able to completely straighten out the issue, which leaves to assumption of a fraudulent management accounting and/or auditing department. Keywords: Overstock.com, GAAP, SEC, analysis tool, auditing, PricewaterhouseCoopers

Continuing General Accepted Accounting Principles Violations of Overstock.com
Many for-profit as well as non-profit organizations have violated the General Accepted Accounting Principles (GAAP). One of them that were highly criticized over the past few years is Overstock.com. Established in 1999 by Dr. Patrick M. Byrne, Overstock.com was created to sell excess inventory through the Internet. The main idea was to use the online format to offer bargains to customers without them having to leave their homes. Despite starting the business with no outside founding, Overstock.com quickly became the leader in selling surplus stock online with a market value of $60 Billion in the United States (Overstock.com - Our History, 2010). From 1999 until 2007 their gross orders increased from $1.8 million to $856 million. With that the amount of items offered and revenues increased enormous too. Revenue in 1999 was recorded with $1,835,000 and in 2009 with $876,769,000 (Overstock.com - Who We Are, 2010). Although Overstock.com’s history sounds very successful and promising, the reality shows a total different picture of the company. The Securities and Exchange Commission re-opened its examination of Overstock.com in regards of GAAP violations and other false and deceptive representations to investors.

Antar (2009) summarizes in his article The Dilemma Facing Overstock.com's New Auditors, how their financial statements were manipulated and that even third party auditing firms like PricewaterhouseCoopers consented to them. Antar (2009) said that in October 2008 Overstock.com revealed consumer credit and reimbursement accounting errors resulting in $8.2 million of declared collected losses in previous reporting time intervals. Those consumer reimbursement and credit errors also caused Overstock.com to underestimate earned income outstanding for equalizing costs and compensations. Instead, Overstock.com inappropriately documented income from its partners using a non-Generally Accepted Accounting Principle money basis. This resulted in collection of $1.8 million in quarter four of 2008, estimated $1.4 million in quarter one of 2009 and $87k in quarter two of 2009. Overstock.com therefore restated all financial reports from 2003 to 2008, but over the past 2 years they had already restated their reports twice due to a violation of the Generally Accepted Accounting Principles (GAAP). The company also failed to make...
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