(Bloomberg) — United Parcel Service Inc. will pay $45 million to resolve claims by the U.S. Securities and Exchange Commission that the delivery company misrepresented its financial results by improperly valuing its transportation business.
Bloomberg’s Most Read
The company did not follow generally accepted accounting principles when evaluating its less-than-truckload operations in 2019 and 2020, the SEC said Friday in a statement. “Had UPS properly valued Freight, its earnings and other reported items would have been materially lower,” the agency said.
UPS, which neither admitted nor denied the findings, agreed to prevent future violations, the SEC said.
The company said in an emailed statement that it recorded a non-cash goodwill impairment charge in 2020 in connection with the investigation. “The agreement will not have a material effect on our business, financial condition, results of operations or liquidity,” UPS said.
Goodwill is a non-monetary asset that companies record on their balance sheets when they buy another business and have to calculate how they arrived at the purchase price. U.S. accounting standards require companies to hold the asset as a line item on their balance sheets and only write it down when there are signs it has permanently lost value. Companies should examine goodwill at least annually for signs of loss of value.
The SEC order alleges that UPS used an outside consultant to value the transportation business without providing certain information, such as internal analysis of the company’s own operations. UPS did not tell the consultant that it had concluded that “a potential buyer would expect Freight to generate significantly less profits after its sale because it would no longer benefit from the synergies and other cost savings it was realizing as part of UPS.” , according to the order.
UPS sold its freight business to TFI International in 2021 for $800 million.
UPS shares rose 1.9% as of 10:15 a.m. in New York.
–With help from Nicola M. White.
(Updates with company comments in fourth paragraph).
Most Read Bloomberg Businessweek
©2024 Bloomberg LP