(Bloomberg) — United Parcel Service Inc. will pay $45 million to settle claims by the U.S. Securities and Exchange Commission that the carrier misrepresented its financial results by improperly valuing its freight business.
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The company did not follow generally accepted accounting principles when it evaluated its less than truckload operations in 2019 and 2020, the SEC said in a statement Friday. “If UPS Freight had been valued correctly, revenues and other reported items would have been significantly lower,” the agency said.
UPS, which neither admitted nor denied the findings, agreed to prevent future violations, the SEC said.
The company said in an emailed statement that it recorded a non-cash goodwill impairment charge in 2020 related to the investigation. “The settlement will not have a material effect on our business, financial condition, results of operations or liquidity,” UPS said.
Goodwill is a non-cash asset that companies record on their balance sheets when they buy another business and must calculate how they arrived at the purchase price. U.S. accounting rules require companies to keep the asset as a line item on their balance sheet and only write it down when there is a sign that it has permanently lost its value. Companies should test goodwill at least annually for signs that it is losing value.
The SEC’s order alleges that UPS used an outside consultant to value its freight business without providing certain information, such as the company’s own internal analysis of the company’s operations. UPS did not tell the consultant that it had concluded that “a potential buyer would expect Freight to generate significantly less profit after it was sold because it would no longer benefit from synergies and other cost savings it received as part of UPS” , UPS said. the order.
UPS sold its freight business to TFI International in 2021 for $800 million.
Shares of UPS rose 1.9% as of 10:15 a.m. in New York.
–With assistance from Nicola M. White.
(Updates with company comments in fourth paragraph.)
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