This case examines a recent SEC settlement with Under Armour, a public
company traded on the NYSE, that was charged with misleading investors and
failing to disclosure uncertainties relating to its reported revenues. Under
Amour was not able to meet analysts’ sales projections for several consecutive
quarters in 2015 and 2016 and resorted to “pulling forward” revenue from future
periods in order to meet these estimates. More than $408 million was pulled
forward, and during this time Under Armour continued to credit its growth to
apparel, footwear and other new offerings. The case was settled in May 2021 and
Under Armour paid a $9 million penalty.
The case spotlights several
important accounting and ethics issues in the context of a real, multi-national
company that most college students are familiar with. From an accounting
perspective, the revenue pull forwards, manipulation of payment terms and
omission of material facts in financial reporting are discussed. From an ethics
perspective, a discussion is included on the timing of reporting “earned”
revenue, the legality of inducing customers to accept early shipments and the
difference between omitting information and misleading investors.
