Accountants debate how problems at Americanas reached R$ 20 billion

The revelation by Americanas of accounting inconsistencies of approximately R$ 20 billion mobilized accounting specialists who are trying to understand how a gap of this size went unnoticed in one of the largest retail companies in Latin America.

Americanas shares fell 77% on Thursday after the retailer said it detected problems in accounting for operations with suppliers and banks. Sergio Rial, who had assumed the presidency of the company just nine days before, resigned, along with the director of investor relations, André Covre. They had replaced Miguel Gutierrez, who had been in charge of the group for 20 years.

Accounting experts interviewed by Reuters remain skeptical of the explanations released so far and point to a lack of detail in the company’s balance sheet, although they have highlighted the need for more information to be disclosed about the inconsistencies, including with regard to the origin of the facts.

“What draws a lot of attention is the size of the business. BRL 20 billion is not easy to hide,” said Eric Barreto, a professor at Insper. “Everyone is talking about it…mainly people who work in the area”, said he, doctor in accounting sciences, citing message groups with auditors.

Rial told investors at a closed event on Thursday that “drawn risk” operations, when a company hires a bank to advance receivables to a supplier, were incorrectly recorded by Americanas for years in the account of suppliers when they should have been considered debts with financial institutions.

One of the doubts raised by the accountants is whether the R$ 20 billion and the interest on these risk-drawn operations are fully on the retailer’s balance sheet or not. That’s because Americanas’ balance sheet for the third quarter –the base date for the amount of R$20 billion is the end of September– shows liabilities with suppliers of just around R$5 billion.

Rial said, noting his short tenure at the company, that as far as he knows, the entire amount disclosed is fully on Americanas’ balance sheet. However, he stated that the discrepancy occurs because the discharge of interest on the operations in question, in addition to other reducing mechanisms, was used, in his view incorrectly, to reduce the liabilities of suppliers.

Amidst the lack of details and the still preliminary nature of the investigation, the explanation does not seem to have fully won over the specialists, who are waiting for more details. “We don’t know to what extent these interest rates were registered or not,” stated Ahmed El Khatib, coordinator of Fecap’s Institute of Finance.

“If the operations are on balance sheet, it’s a problem of presentation. But I don’t know if they are fully on balance sheet,” said Barreto.

“IT’S NOT BLACK ON WHITE”

“Banked risk” transactions are commonly used by companies in supplier relationships, but there is no accounting standard on how to record them, experts said. “It’s not black and white”, sums up accounting professor Fernando Dal-Ri Murcia, from FEA-USP. The term, the intention, and the existence or not of interest are some of the factors that can determine whether a transaction of this type is mainly commercial, and therefore enters the line of suppliers, or financial, should enter as a bank debt, he said.

The Securities and Exchange Commission (CVM) warned in circular letters over the years to this issue. The agency opened at least two processes to investigate Americanas after the revelation of the case on Wednesday.

Meanwhile, Abradin, an association of minority shareholders of companies, reported the case to the CVM asking for an investigation into Americanas’ audit firm, PwC. Sought on Thursday, PwC did not comment.

This accounting reclassification is important, for example, because in financing contracts in which the company’s debt exceeds an agreed level, the creditor is entitled to renegotiate the terms. XP analysts led by Danniela Eiger wrote that Americanas has a “small part” of its contracts subject to these conditions, but that the limit could still be exceeded depending on the adjustment.

LACK OF DETAILS

Another point raised by accounting specialists is how the retailer discloses the operation. “It is normal for companies to present the existence of these demonstrations in explanatory notes,” said Khatib, from Fecap.

Magazine Luiza’s balance sheet, for example, says that in its case the risks drawn are in the line of suppliers, because they do not change the deadlines, prices and conditions established with suppliers. Via, which ended up publishing clarifications to the market after investors became concerned about possible contagion from Americanas’ revelations, puts these transactions under its own rubric called “agreement suppliers”.

“When we look at the balance sheets (of Americanas) we do not find these words ‘forfait’, ‘confirming’, ‘withdrawal risk'”, said Barreto, from Insper, in reference to other terms with which the operation is known.

Rial said the retailer will need a significant capital increase in view of the potential increase in financial expenses, and that as far as “as far as he can see” “all debts have been paid, suppliers have been paid” and taxes as well. Impacts on cash will not be seen in the short term, depending on the attitude of creditor banks, said the executive.

The company announced an independent committee to clear its accounts, but did not give any details on deadlines.

RAIO-X AMERICANAS SA
(data for the 3rd quarter of 2022)
Foundation: 1929, in Rio de Janeiro
Net Revenue: BRL 5.4 billion
EBITDA: BRL 582.3 million
Net loss: BRL 211.6 million
Shops: 3,601
Employees: about 40 thousand
Mainly competitors: Via (Casas Bahia and Ponto), Magazine Luiza

Source: company