August 21, 2018

Overstock.com Stockpiling Gold Just in Case

In case you've been pining for some Overstock.com coverage (oh, just admit it!), here's an update we've deemed worthy:

On Overstock's last quarterly report to the Securities and Exchange Commission, the company listed $10.9 million in "precious metals" among its assets — $6.3 million in gold and $4.6 million in silver.

The coins are stored at an off-site facility. The company lists the holdings as a risk, since the value of the stockpile depends on fluctuations in market rates. For the first six months of 2015, the company reported a $52,000 loss on its holdings.

"That's very unusual," said Scott Schaefer, a professor of finance at the David Eccles School of Business at the University of Utah. "I've not heard of a company stockpiling gold before."

Given the context, I don't find it all that unusual. This is the same company whose CEO packs firearms into random luggage. The same company that has (and still) discloses social media as a risk to its reputation. Here's the 10-Q. It'll meet your expectations.

And here's company chairman (and Utah gubernatorial candidate) Jonathan Johnson explaining it to the United Precious Metals Association:

"We expect when there is a financial crisis, there will be a banking holiday," Johnson, Overstock chairman of the board, told the group. "I don't know if it will be two days or two weeks or two months. But we have $10 million in gold and silver in denominations small enough … that we can use it for payroll. We want to be able to keep our employees paid [and] safe and our site up and running."

Also, Overstock.com accepts bitcoins, so if this imaginary banking holiday does in fact last two months and you suddenly need super-discounted furniture, rest assured that Patrick Byrne & Co. will be there for you.

[SLT, 10-Q]

Related articles

Do Recessions Cause Accounting Irregularities?

Thumbnail image for Cooking the Books.jpgSome people think so. Emily Chasan at Reuters discusses the perceived rise of accounting irregularities today:

“Corporate balance sheets may be showing signs of the wear and tear from the prolonged U.S. recession as accounting irregularities are starting to surface at growing numbers at U.S. companies.”
Okay but don’t accounting regularities happen all the time? If the economy is humming along nicely does that mean that less companies are engaging in accounting hocus-pocus? Hmmmmm.


But there’s more argument for “it’s the economy stupid”:

“Statistically you can show any time you have a recession or some type of tremendous decline in an economy you’re going to see financial pressures on companies,” said Bruce Dorris, program director at the Association of Certified Fraud Examiners, noting that corporate employees can sometimes be motivated to be overly aggressive with accounting or commit outright fraud to meet targets, particularly in difficult economic times.

The article cites Apollo Group’s stock dropping 18% yesterday after announcing that the SEC was starting an “informal inquiry” into its revenue recognition policies. It also lists Overstock.com, Town Sport International Holdings (owns NYSC), Zale Corp and also Huron Consulting whose stock price is still down 40% since the announcement of the SEC investigation. All these companies have delayed earnings reports or had investigations into their accounting practices.

So feel free to discuss your clients and their creative nature in this economy. Are their hard-nosed GAAP puritan ways caving to earnings pressure or are your partners the ones caving in the name of client service? Nobody wants a to be working on a client that’s going through a restatement. Nobody.

Accounting irregularities may be on the rise in U.S. [Reuters]

FASB’s Final Word on Fair Value Disclosures?

silenced.jpgEditor’s Note: Want more JDA? You can see all of her posts for GC here, her blog here and stalk her on Twitter.
Of the 111 comment letters FASB published on Fair Value Measurements and Disclosures: “Improving Disclosures about Fair Value Measurements”, this one was my favorite:

Please don’t require Companies not SEC registered to spend any more money on reports under this rule.
Lloyd Amundson

Amen, brother.


The usual suspects left the usual complaints; BDO said excessive disclosures would be both costly and useless, Uncle Ernie implied it was an interesting concept but an expensive flop in practical application, and PwC prefers once a year disclosures instead of quarterly.
Verizon even got in on the action, insisting, “proposed additional extended sensitivity disclosures would unnecessarily complicate financial statement disclosures without providing any meaningful benefit to financial statement users.”
I think it is entirely reasonable to point out that FASB is feeling the pressure to converge and the IASB is encouraging slightly less optimistic financial statements. The IASB openly admits that it is under outside pressure to adopt such a stance:

Responding to requests by the G20 leaders and others, in June 2009 the IASB published a Request for Information on the practicalities of moving to an expected loss model. The responses have been taken into account by the IASB in developing the exposure draft.

The IASB continues:

The IASB will also cooperate closely with the US Financial Accounting Standards Board (FASB) with a view to agreeing a common approach to the impairment of financial assets.

Since when is this for the IASB to decide?
Political influences are nothing new to accounting rulemakers but what happens when those influences come from foreign bodies far outside of our control? It is a known fact that the European Union has a large stake in IASB, so how can we be sure their intentions are pure as we move forward at their urging?
The Financial Crisis Advisory Group, an international body set up by the IASB and FASB to advise them on standard-setting issues related to the financial crisis, warned recently that that political pressure on accounting standard-setters posed a threat to “the very existence of international accounting standards.”
Integrity in financial statements? Keep looking, not going to find any of that here.