Overstock.Com: Unusual/Conflicting Accounting Principles Impact

1576 WordsNov 12, 20117 Pages
Abstract Overstock.com, also known as O.co, with headquarters in Salt Lake City, Utah was founded in 1999 by Patrick S. Byrne, its CEO and Chairman of the Board of Directors. Byrne "recognized the potential in liquidating excess inventory through the Internet. Up until then, consumers had relied upon outlet centers with crowds and limited product selections for finding bargains, and small retailers found little access into the world of closeout merchandise" (O.co, 2010). Meantime, the art of online shopping seemed to be skyrocketing. In 1999 Overstock.com reported a "$1.8 million in annual revenue to over $1 billion in revenue in 2010. Overstock.com is a major online retailer offering a wide variety of high-quality, brand name…show more content…
It is quite obvious that Overstock.com violated the GAAP by producing, sort of speak, an illegal reserve to materially inflate future earnings or reduce future losses from Q4 2008 to Q3 2009. "Overstock.com ridiculously claimed that the collection of the entire amount of its underbillings (every single penny) “was not assured” and instead falsely claimed that a "gain contingency" existed rather than make a reasonable estimate of uncollectable amounts as required under SFAS No. 5. Therefore, Overstock.com improperly recognized income from underbilled fulfillment partners as amounts due to the company were collected on a non-GAAP cash basis, rather when they were earned under accrual accounting or GAAP" (Antar, 2010). Overstock.com clearly and without precedence violated its published mission and vision statements which clearly states: "Overstock.com’s Mission: To save people money. Overstock.com’s Vision: Overstock.com provides online shoppers with the best value and a superior customer experience. We are honest, helpful, efficient, accountable, and trustworthy, and are committed to profitability and service" (O.co, 2010). "According to Overstock.com's S-1 filed in March 2002, during Overstock.com's entire history, the company had lost money: • Fiscal Year Ended December 31, 1997: $661 thousand net loss • Fiscal Year Ended December 31,

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