nvidia's bad accounting principles

[eklass]

sorry guys, i just gotta laugh at this on since i just bought an ati card... here we go, "muwhahaha"

i guess they thought that GAAP wasn't

Nvidia Corp. said on Friday it reached a tentative deal with U.S. regulators who were planning to recommend enforcement actions against the chip designer. The company, whose accounting practices have been under investigation by the Securities and Exchange Commission since early 2002, said in a regulatory filing that it had received a "Wells notice" indicating that the agency's staff was going to advise the full commission to take enforcement action related to the probe.

Shares of Nvidia fell nearly 4 percent. Nvidia said in an annual report filed with the SEC that it then reached a tentative deal with the agency this month. The Santa Clara, California, company said it would not have to pay any fines or penalties, but must agree to a cease-and-desist order against any future violations of certain federal securities laws.

Nvidia said the review of the agreement could take weeks or even months to complete, and there is no guarantee the SEC would approve the deal. In April 2002, Nvidia said that as a result of the investigation and its own internal review, it would restate results going back to its 2000 fiscal year to correct accounting errors.

In the annual report, Nvidia also disclosed that the bankruptcy trustee for a company called 3dfx served it in March with a complaint demanding additional payments under an April 2001 asset purchase agreement between the two companies. Nvidia said it believes the 3dfx bankruptcy filing would allow a determination of the full extent of that company's debts and liabilities, and in turn Nvidia's obligations under the April 2001 deal.

After rising 317 percent in 2001 to be the best-performing stock on the S&P 500, Nvidia shares lost nearly 83 percent of their value in 2002 because of the regulatory probe, a dispute with Microsoft Corp. MSFT.O over chip pricing, and inventory issues. But the shares are up nearly 18 percent in 2003 after Nvidia settled the dispute with Microsoft, its largest customer at 23 percent of revenue, and rolled out a series of new chips for the desktop and mobile markets.

linkage

 

[oldfart]

I think they need to get WHQL certified accountants.

 

[chizow]

Tough call.

1) Aggressive accounting that affects prior period revenue figures (when things were good and you had money springing from your ears anyways). A few numbers on previous financials may get smaller, but that big number in cash reserves will make for a nice pillow at the end of the day.

or

2) Insider trading scandals that pummel your stock prices, steal the thunder from revenue increases generated by the only part you've produced in the history of your firm's existence that could lay claim to the GPU performance crown, and also managed to throw you in the red (loss) for the most recently ended quarter.

Which would you prefer?

Chiz

 

[eklass]

what ever happened to honest business?

 

[Shade4ever]

Originally posted by: eklass
what ever happened to honest business?

WHAT??!! And honest business? Where? We need to get the SEC looking into this right away...it could cost the government an untold amount of money!

 

[chizow]

Originally posted by: eklass
what ever happened to honest business?

Never existed...its human nature to cheat, lie and steal (since killing doesn't seem to be as socially acceptable) to get what you want.............nowadays, the cavemen don't carry clubs, they wear suits and ties and drive Beemers.

Chiz

 

[nemesismk2]

Originally posted by: eklass
what ever happened to honest business?

Honest business hehe, that's a new concept isn't it?

 

[eklass]

Originally posted by: chizow

Originally posted by: eklass what ever happened to honest business?

Never existed...its human nature to cheat, lie and steal (since killing doesn't seem to be as socially acceptable) to get what you want.............nowadays, the cavemen don't carry clubs, they wear suits and ties and drive Beemers. Chiz

i disagree. i think it is human nature to be selfish, which in turn leads to greed. it is those methods (lying, cheating, and stealing) that allows us to fulfill our selfish desires. there is always some form of honest business, usually in small mom & pop-type stuff. however, when comanies begin amassing large inventories and a large workforce, it's harder to just type in the price, now you've got to have a SKU. in other words, there's other motives to the situation. it's not just making your 50% cut on the merchandise. now you've got to keep inventory because you're no longer a private company. now you've got millions of people to please, not just the ones in line to buy your video card. what would happen if companies reported net losses every quarter? thier stock would drop, and it does. these publicly held companies are facing so much pressure due to public investors that they have to lie just to keep from investors selling stock and pulling out of the company. it is through this method that they keep investors investing and revenue coming in.

thoughts, questions? i feel like i should be on bill marr's show or something




p.s. does anyone else feel this should be moved to off topic? mods?

 

[jiffylube1024]

Originally posted by: eklass
what ever happened to honest business?

Honest business practices (ie not cooking the books) doesn't generate juicy profits every quarter when the company meets or exceeds predictions. The business paradigm of reporting "cooked" quarterly profits is flawed, but can you think of a better system? Unfortunately, niether can most other businesses.

 

[Doh!]

Unless this event drives nVidia out of business, the winning party is nVidia's accountants. More fees for restating the financials & all the time they'll charge in dealing with the SEC staff.

 

[eklass]

as a person who was considering becoming a CPA, i don't see how they (the accounting firm) would take on the project knowing of the shifty shituation. doesn't this jeopardize the licenses of the accountants for the firm? or is the firm at fault and the accountants are just doing what they were instructed? who is responsible for the blame here? nvidia for wanting it done, the firm for agreeing to do it, or the accountants for adding it all up?

who's to blame in a murder when you are told to kill someone and you hire someone to have it done? of the three who would get tried for murder?

 

[PING]

dishonest business men/women bought off the politicians to weaken every laws that pertain to good accounting.

 

[Schadenfroh]

Originally posted by: eklass

Originally posted by: chizow

Originally posted by: eklass what ever happened to honest business?

p.s. does anyone else feel this should be moved to off topic? mods?

 

[chizow]

Originally posted by: eklass
as a person who was considering becoming a CPA, i don't see how they (the accounting firm) would take on the project knowing of the shifty shituation. doesn't this jeopardize the licenses of the accountants for the firm? or is the firm at fault and the accountants are just doing what they were instructed? who is responsible for the blame here? nvidia for wanting it done, the firm for agreeing to do it, or the accountants for adding it all up?

who's to blame in a murder when you are told to kill someone and you hire someone to have it done? of the three who would get tried for murder?

Its not quite that simple, which is why you constantly see very complicated situations between public accountants (auditors), the SEC, and the big name firms popping up in these accounting scandals. I spent 3 years as a consultant for one of the Big 4 (5 at the time), and the lines aren't drawn as nice and tidy as you would think. Much of the problem is that the tech boom that hit in the late '90's was something nobody was ready for. This spurred incredible growth in the tech sector in industries that completely redefinied accounting standards and interpretations. There was no "right" or "wrong" way, there was only interpretations of GAAP and new pronouncements from FASB that did their best to keep up with the ever-changing issues in dealing with these new industries.

nVidia and many other tech sector firms (look at Microstrategy for instance) were probably guilty of aggressive accounting, but that's because there really wasn't any better guidance out there. The firms that audit these companies have to deal with this risk, and they mitigate it by following GAAP and FASB pronouncements to the best of their abilities. However, back to the human nature side of things, each engagement is run by a group of partners or a single partner depending on the size of the client, so naturally, there is some give and take when it comes to these accounting interpretations.

Obviously, the client or the firm wants to protect their best interests, while the firm is still trying to maintain their integrity. Is integrity compromised by a big paycheck at the end of the audit engagement? Do partner's sign off on aggressive accounting to ensure they will be maintained as the recurring engagement firm? These are some of the problems with the current system, which is why there's such a big fuss about it over on Capitol Hill.

Chiz