The organic food maker Hain Celestial Group announced that their financials for 2015 and Q1 2016 will be delayed as the company was evaluating their accounting for revenue. Not just that they also stated that the company also is looking into their internal controls over financial reporting. So not only are their revenue issues- the issues stem from flaws in their system/procedures.
The issue at hand is the period in which the company recorded revenue from concessions given to distributors, currently the company recognizes revenue when the products are shipped to the distributors vs when the distributor sells to retailers. For revenue recognition, one of the conditions is that the product is delivered, and just shipping the product to the distributor doesn’t meet the delivery criterion.
Even though the company states that this doesn’t impact the revenue of the company, it definitely shifts revenue between periods, making some periods look more profitable than they actually were.
The bigger issue is that it was not incorrect application of the accounting policy, the company is questioning their internal controls over financial reporting, so there are some systems issues/ procedural issues which need to be addressed. Lets see what the final result of their review is.
