The number of material accounting mistakes made by U.S. public companies declined every year since 2006, but preliminary data for this year indicate a reversal. During the first six months of 2018, 65 companies detected accounting mistakes significant enough to require them to restate and refile entire financial filings to regulators, compared with 60 companies for the same period last year, according to Audit Analytics. The Massachusetts-based research firm analyzed disclosures from more than 9,000 U.S.-listed going back to 2005, identifying companies that had to reissue their financials because prior documents were deemed no longer reliable. The uptick came during a period when finance teams were overhauling corporate accounting paperwork to comply with the new U.S. tax law and new revenue accounting rules. In many instances CFOs and their staffs had to go over past financial reports to recalculate the value of tax credits or liabilities, or to assess how past results would look under new rules. In the process, companies including Seneca Foods Corp. SENEB 1.19% and Camping World Holdings Inc. CWH -2.02% found past errors that triggered restatements. Seneca, a fruit and vegetable processor and distributor, in June detected a mistake in how it calculated revenue from its contract with Green Giant and other brands. The discovery came after Seneca reached out to the Securities and Exchange Commission’s Office of the Chief Accountant in May to request guidance on conforming to the new revenue accounting standard. The error led the company to understate its 2017 revenue by $16.5 million, with restated revenue totaling $1.26 billion. Earnings for 2017 were restated to $1.60 a share, an increase of 33 cents from what it had previously reported. Seneca had to restate its annual filings for the fiscal years ended March 2014 through March 2018, and interim filings for fiscal 2017 and 2018. Seneca’s management determined that the error occurred due to a deficiency in its internal controls, the company said in April filings. Seneca said it would institute new review procedures and improved documentation standards, technical oversight and training by April 2019, the start of its next fiscal year. A Seneca representative declined to comment. “Errors can be anything from a misapplication of accounting principles to an error in inputs in accounting software or an error in [ Microsoft ] Excel schedules,” said Michael Burke, partner at accounting firm UHY LLP. But whether an error is due to a mistake or fraud, a restatement can negatively affect those who should have caught the mistake. “I don’t think a restatement is generally looked at positively, particularly when it comes to the people held accountable like the CFO and the controller,” Mr. Burke said. Not all restatements are caused by innocent errors. Some result from actions that are suspect from the start, said Ian Ratner, a forensic accountant and founder of financial advisory firm GlassRatner Advisory & Capital Group LLC. “Often times it’s someone further down who’s uncomfortable and calls someone like a board member,” Mr. Ratner said. Paint maker PPG Industries Inc. in April said that it had received a complaint through an internal reporting system and uncovered a multitude of errors in its financial statements. PPG’s investigation found at least $1.4 million in expenses that were improperly accounted for and up to $5 million of expenses not properly accrued in the first quarter of 2018. This included $1.4 million in amortization expenses that weren’t recorded over a three-year period and an accrued health insurance liability was understated by $500,000. Moreover, there was a failure to adjust inventory value higher by $2.1 million due to inflation of raw-materials costs abroad. PPG in May fired controller Mark Kelly, who PPG said directed subordinates to override internal controls to get the company’s earnings up to analyst expectations. Mr. Kelly couldn't be reached for comment. The company said its filings contained errors dating back to the fourth quarter of 2016. As a result of the restatement, PPG’s 2016 net income from continuing operations was decreased by $4 million and 2017 net income from continuing operations was decreased by $2 million, among other changes. The company also restated its quarterly results for all of 2017 and the final quarter of 2016. During that time, PPG matched or beat estimates from analysts polled by Thomson Reuters every quarter. PPG declined to comment on the matter. Other companies uncovered unexpected errors in financial reports while preparing for changes in the tax law. Camping World discovered it had incorrectly recorded a deferred tax asset related to its acquisition of a 41.7% stake in CWGS Enterprises LLC. The recreational-vehicle company said it should have established a valuation allowance of $102.7 million against the tax asset when recording the acquisition. The error affected financial reports for three quarters and made the company’s loss in the fourth quarter of 2017 appear $47 million wider. Camping World had originally reported a fourth-quarter net loss attributable to the company of $65.1 million, or $1.87 a share. Its restated loss attributable to the company was $18.1 million, or 52 cents a share. Representatives from Camping World didn’t respond to requests for comment. Write to Nishant Mohan at nishant.mohan@wsj.com Copyright ©2019 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8
New US tax laws and revenue accounting rules have led to an increase in the number of accounting errors by public companies, with Seneca Foods and Camping World Holdings among those affected, according to preliminary data from Audit Analytics. During H1 2018, 65 companies detected accounting mistakes serious enough to warrant a complete refiling, reversing a decade-long trend of improvement. Seneca underestimated its 2017 revenue by $16.5m, and refiled with the correct figure of $1.26bn, while Camping World uncovered an error in how it had recorded a deferred tax asset.