Disney Accused Of Lying About revenue according to Former WDC Accountant

[quinnmac000]

A former Walt Disney Co. accountant says she has filed a series of whistleblower tips with the Securities and Exchange Commission alleging the company has materially overstated revenue for years.

Sandra Kuba, formerly a senior financial analyst in Disney’s revenue-operations department who worked for the company for 18 years, alleges that employees working in the parks-and-resorts business segment systematically overstated revenue by billions of dollars by exploiting weaknesses in the company’s accounting software.

Kuba said she has met with officials from the SEC on several occasions to discuss the allegations.

Kuba has also alleged that employees sometimes recorded revenue twice for gift cards, both when guests bought the gift card and when it was used at a resort. Sometimes, revenue was recorded even though a gift card was given to a guest for free following a customer complaint, for instance, according to the whistleblower’s allegations.

Kuba’s filing alleges that flaws in the accounting software made the manipulation difficult to trace, though the consequences could be significant. In just one financial year, 2008-09, Disney’s annual revenue could have been overstated by as much as $6 billion, Kuba’s whistleblower filing alleges. The parks-and-resorts business segment reported total revenue of $10.6 billion in 2009, according to its annual report filed with the SEC.

Kuba told MarketWatch she first reported the alleged revenue-recognition issues to management in 2013. She said that no one responded to her at that time. She said that she escalated her concerns to a more senior executive in 2016 and that Disney’s corporate audit group contacted her once in November 2016 but never followed up.

Kuba said she brought her concerns to the SEC in August 2017. She was fired from Disney about a month later.


Disney whistleblower told SEC the company inflated revenue for years - MarketWatch

 

[Clive]

Seems like a lot of people are coming knives out for the king... just in time for D23, and when there's a perceived weakness in the underperformance of Galaxy's Edge.

 

[Nick]

Seems like a lot of people are coming knives out for the king... just in time for D23, and when there's a perceived weakness in the underperformance of Galaxy's Edge.

Yup, and a story like this is much bigger than our silly Fake-Al Lutz story. They know Bob Iger & Co. are gonna be around to be asked questions this weekend so it's a good time to come out swinging.

 

[Parkscope Joe]

Man if they fudged this imagine the other things they could have done too.

 

[Mad Dog]

This could end up being a really big Wall Street story if the info is correct. It would help explain all of those rosy quarterly reports when word on the street was WDW attendance was far off projections. Only so much revenue can be made up with price increases. And then there's those 11 million attendance figures for DHS with only a handful of rides.

 

[Brian G.]

Well, this has been a week...

 

[UniversalRBLX]

This is going to be a fun week.

 

[jrn14]

This is not good news!

 

[Nick]

Well, this has been a week...

And it's only Monday!

 

[Mad Dog]

Damn, as I said yesterday, I was getting really bored with theme park news and had slowed up posting....But now I'm revitalized with these last two Disney stories. Even if they don't turn out to be much, they've sure provided a lot of reading pleasure. I'd love to be a fly on the wall of the next private Disney Board meeting. ...Hell, Iger may need to wear a false mousetache and glasses to sneak into D23.

 

[quinnmac000]

from the journalist,

 

[Cup_Of_Coffee]

For some reason, I cannot get this article to load onto my computer. What is a quick summary? How bad can ramifications be for Disney?

 

[Nick]

from the journalist,

And this is why you don't piss off the same person you ordered to break finance laws. The receipts will haunt you.

 

[zg44]

I regularly compare Disney's P&R segment to Universal (what Comcast tells us) and SeaWorld, and their revenue numbers generally look comparable when you adjust for their # of parks and # of hotel rooms.

I've never gotten the sense that there's a massive overstatement there, but there could be some issues in the $50-100 million range in terms of backtaxes owed on some of these things (i.e. complimentary items being counted in revenue, gift card issues, etc.).

I just don't get the sense though that the $6 billion number being thrown around is a realistic number though.

 

[Nick]

I regularly compare Disney's P&R segment to Universal (what Comcast tells us) and SeaWorld, and their revenue numbers generally look comparable when you adjust for their # of parks and # of hotel rooms.

I've never gotten the sense that there's a massive overstatement there, but there could be some issues in the $50-100 million range in terms of backtaxes owed on some of these things (i.e. complimentary items being counted in revenue, gift card issues, etc.).

I just don't get the sense though that the $6 billion number being thrown around is a realistic number though.

The $6B was for 2008-09, specifically. I'm still skeptical, but I will say that was an extremely low point for the parks.

 

[zg44]

The $6B was for 2008-09, specifically. I'm still skeptical, but I will say that was an extremely low point for the parks.

Yeah, that's true, I still just don't think that those items being alleged (gift cards, complimentary items, etc.) are anywhere near able to add up to more than a couple hundred million.

There'd need to be some kind of massive irregularity in the way they're recording revenue for a full 40+% of their parks segment revenue to be falsified.

 

[tyro]

This is something I’m sure almost any major corporation does in one way or another. This story very well could open the door for other stories especially with the accounting surrounding Shanghai, as that was the most recent major project where there could be adjustments made to make it appear better than it was.

 

[Mad Dog]

This is something I’m sure almost any major corporation does in one way or another. This story very well could open the door for other stories especially with the accounting surrounding Shanghai, as that was the most recent major project where there could be adjustments made to make it appear better than it was.

and that was what Gary Snyder's Huffington Post article a couple of years ago was about....before it was wiped clean off of HP after Disney pressure.....

 

[Andysol]

I knew you had bad info @Joe

Pandora only cost $1 billion in gift cards. :tease:

 

[tyro]

and that was what Gary Snyder's Huffington Post article a couple of years ago was about....before it was wiped clean off of HP after Disney pressure.....

There’s the full circle! Any chance the Snyder’s have a sister?