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Danish distributor's auditor raises US$126 million doubt over accounts, which could hit US parent

Henrik Rasch | July 7, 2014
The auditor of Ingram Micro subsidiary Brightpoint Europe says assets the company valued at 688 million Danish kroner are worth nothing.

Danish IT company Brightpoint Europe overstated its net income for 2013 by by 687.75 million Danish kroner (around US$126 million), its independent auditor said in a qualification of the company's annual accounts.

Brightpoint Europe, a subsidiary of U.S. IT distributor Ingram Micro, listed among its assets 687.75 million kroner in receivables from group enterprises in its 2013 results.

But independent auditor PwC qualified the accounts, saying the 687.75 million kroner debt was not written down sufficiently, and should have been valued at zero. Thus, the auditor said, Brightpoint Europe's net income for the year and its equity were artificially inflated by the same amount.

Without those assets on its books, Brightpoint Europe would have ended its fiscal year with a deficit of more than 650 million kroner and negative equity of around 350 million kroner.

The auditor's qualification was pointed, said Lars Krull, an accounting expert and Senior Advisor at Aalborg University.

"It is one of the most direct audit reservations I've ever seen. The auditor has no doubt that there is something in the accounts that doesn't add up. So this reservation is very serious," Krull said.

According to Krull, the auditor's reservations are also significant for U.S. IT group Ingram Micro, which owns Brightpoint Europe. The potential hole in the Danish company's coffers would swallow up to a third of the U.S. group's total profit.

Krull is baffled that the American group did not take into account the severe criticism from the auditor, which incidentally is also responsible for the revised Ingram Micro's global accounts.

"It's not small change we are talking about. Their net income is only $310 million, so it's about a third of Ingram Micro's overall performance which can be questioned," said Krull.

The serious doubts about the value of the Danish company have not made a mark on Ingram Micro's financial statements or announcements to the stock exchange in New York, where the group's shares are listed.

At Ingram Micro's headquarters in Santa Ana, California, Damon Wright, executive director of investor relations, confirmed that Ingram Micro had not reflected the doubts raised about the Danish subsidiary's results in its report to U.S. investors.

"This is an intercompany receivable, which has no impact on the consolidated financial statements of Ingram Micro," he said of the 687.75 million kroner debt in question. "We are in the process of addressing it in the manner we believe is appropriate," he told Computerworld Danmark.

The Danish branch of Brightpoint Europe's accounting firm, PwC, declined to comment on Wright's remarks, and would not provide more detail on its qualification of the Brightpoint Europe accounts.

PwC's U.S. division is auditor for Ingram Micro Group.

 

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