UPS (NYSE: UPS) on Friday paid $45 million to resolve allegations from the U.S. Securities and Exchange Commission (SEC) that the valuation of its cargo business was unfair, leading to misstatements of its 2019 and 2020 financial results. We agreed to pay USD. The SEC is asserting Atlanta’s claim. -based courier company did not follow Generally Accepted Accounting Principles (GAAP) and significantly overstated the value of its UPS Freight division.

SEC findings and settlements

An SEC investigation revealed that UPS relied on outside consultants to assess the value of its cargo business. However, the company withheld important internal analysis that showed the valuation was much lower. Consultants valued UPS’s shipments at US$2 billion, far higher than UPS’s internal estimate of US$650 million. The SEC argued that if UPS had used its own calculations, the company would have been required to record a $500 million goodwill impairment charge, which would have significantly reduced its reported earnings.

Goodwill is recorded when a company acquires another business for more than the fair value of its assets. In the case of UPS, the performance of its cargo division has deteriorated significantly and the value attributed to goodwill no longer reflects economic reality. SEC Associate Director Melissa Hodgman emphasized the importance of accurate valuations, saying, “Goodwill balances provide investors with valuable insight into whether a company is successfully operating the businesses it owns.” said.

US accounting rules require companies to test goodwill for impairment annually. The SEC said UPS ignored clear evidence of impairment and failed to disclose a non-binding 2020 term sheet to sell cargo units for $800 million, less than half of consultants’ estimates. pointed out that this further complicates the problem.

UPS did not admit or deny any wrongdoing as part of the settlement, but agreed to avoid future violations.

Impact on UPS and market reaction

Despite the allegations and settlement, UPS stock rose 1.9% on Friday and is now up 2.63% to $134.8, reflecting investor confidence in the company’s broader financial stability. .

UPS emphasized that the settlement amount has already been recorded in its financial statements.