On May 6, 2019, Kraft Heinz Co. disclosed that it would restate its financial statements due to faulty procurement practices. This is an example where the timing of expense recognition triggered the restatement rather than error corrections in the accounting and reporting.
In a regulatory filing, Kraft said the investigation showed “several employees in the procurement area engaged in misconduct” that qualitatively affected its financial reporting for 2016, 2017, and the first three quarters of 2018.
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According to Kraft, the misstatements “principally relate to the incorrect timing of when certain cost and rebate elements associated with complex supplier contracts and arrangements were initially recognized, and once corrected for, the company expects to recognize corresponding decreases to costs of products sold in future financial periods”
The adjustments to financial statements totaled about $208 million, of which approximately $27 million was recorded in the fourth quarter 2018 cost of products sold, leaving a cumulative net misstatement of $181 million.
Kraft said that “The findings from the investigation did not identify any misconduct by any member of the senior management team.” However, the facts indicate otherwise.