channel stuffing

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Channel Stuffing

An illegal practice in which a company willfully sells more of its product to distributors than the distributors can sell to customers. The company makes these sales on credit, which temporarily boosts its accounts receivable and by extension its current assets. This makes the company look healthier than it really is which can raise its stock price. Eventually, when the distributors are unable to sell the product they return it to the company instead of paying, which reduces the accounts receivable and brings the company's balance sheet in line with reality.

channel stuffing

Artificially inflating current sales and earnings by shipping more goods than would normally be ordered. For example, an appliance manufacturer may inflate revenues and earnings in the current accounting period by shipping to retail stores more refrigerators, stoves, and dishwashers than the stores are likely to sell. The practice of channel stuffing borrows revenues and earnings from the future because overstocked customers will reduce orders in future periods.

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References in periodicals archive ?

Acer has written off huge inventory in the past and there have been reports about channel stuffing.

The ace up Acer's sleeve

While many channel stuffing schemes fall into that gray area between aggressive earnings management and outright fraud, the tactics involved in channel stuffing enhance current earnings at the expense of future sales, which leads to a slippery slope of needing to artificially boost future earnings as well.

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All these factors resulted in the dangerous combination of inventory channel stuffing and out-of-stocks.

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head of sales (ask if there are any side deals with any customers, channel stuffing, so called "round-trip" sales, etc.

Ten best practices for audit committees: the public company audit committee now has an enhanced role and needs to revise some of its practices. Here are some key areas to focus on

It's a revenue recognition case alleging that channel stuffing, side deals and other arrangements artificially inflated revenue.

Public defender: Former Assistant U.S. Attorney provides an inside look on fraud prosecution

Channel stuffing occurs when a company induces retailers along its distribution channel to substantially increase their purchases before they would, in the normal course, otherwise purchase products from a company.

Evolving theories of scheme liability: does your D&O policy cover guilt by association?

Some manufacturers will continue their traditional product push cycle of long production runs and channel stuffing.

ECR's transparent legacy: like manufacturing processes, buying models continue to move toward opposite poles. Your company's future could depend on which side it chooses

Revenue Recognition: The Games People Play, covering such issues as channel stuffing and fictitious entries.

Financial statement fraud, integrity of financial information continue to be front-burner issues

Maffei admitted to "the usual seasonal PC weakness" and said Microsoft was seeing the effects of some channel stuffing and inventory clearouts due to the shift over to the Pentium III.

Microsoft Says it Hasn't Seen Weakness in PC Sales

Shipments in material amounts near or at year-end may not necessarily translate to channel stuffing, but if there is a sense of pressure within the company to book revenue, past events have shown that not all the revenue was legitimate.

A new era: using the internal audit to spot fraud

which accounted for 51 percent of the Company's accounts receivable last year) and the possibility that channel stuffing may have hidden slowing growth.

Hagens Berman Investigating Potential Securities Fraud by Green Mountain Coffee

Channel stuffing may work for awhile, however problems arise when high sales from past quarters are made at the expense of poor sales in another quarter.