S&P: Lease accounting could delay reports
By Larry Thomas -- Furniture Today, April 3, 2005
New York — Standard & Poor's has issued a report warning that many publicly held U.S. retailers may have to delay filing financial reports and/or restate earnings because of reviews of their accounting practices regarding leases.
The report by the ratings service said the accounting reviews shouldn't significantly affect cash flow or add to future costs, but delays in filing reports with the Securities and Exchange Commission could cause companies to fall out of compliance with loan covenants.
"We are predominantly concerned with possible delays in 10-K or other periodic filings with the SEC that may result from this accounting review," said Leonard Grimando, financial reporting analyst with S&P. He added that it's unlikely to affect retail industry ratings.
Last week, The Rowe Companies, which owns retail chain Storehouse, delayed the release of its first-quarter financial statements by two days while completing such a review. The accounting changes resulted in Rowe reducing its net income by $142,000, or 1 cent per share, for fiscal 2004, and $332,000, or 3 cents per share, for fiscal 2003. In addition, fiscal 2002 net income was reduced by $61,000.
The accounting changes primarily involve how retailers recognize rent expenses on their books. In Rowe's case, the company accelerated the recognition of rent expenses to include periods when the company had control of the leased property before a store was opened. The increased expenses resulted in lower net income.
The S&P report, "Lease Accounting Restatements Unlikely To Affect U.S. Retail Industry Ratings," is available to subscribers of Rating Direct, the company's Web-based credit research and analysis system, at www.ratingsdirect.com.
Easyhome revenues rise 9.3%, but income down
08/30/2009Easyhome revenues climb, but income down
08/11/2009S&P: Lease accounting could delay reports
04/07/2005Dorel profits down 21% as sales fall 7.2%
08/11/2009Rowe to restate earnings
03/28/2005
