Today JDA Software Group’s wallet will be a bit lighter as the Securities and Exchange Commission slapped the Scottsdale-based, supply chain planning and execution, software company with a $750,000 fine for having inadequate internal accounting controls over its financial reporting-which ultimately meant misstating revenues in public filings.
The investigation found that JDA didn’t report revenue from certain software license agreements it sold to customers. According to the SEC “…if companies fail to show vendor specific objective evidence of fair value (VSOE) when determining the fair value of certain services related to a software license agreement, then they cannot immediately recognize the entire revenue from that agreement. With proper internal controls that appropriately considered VSOE, JDA would have recognized revenue from certain sales ratably over the term of a services agreement.”
“Companies must have adequate internal accounting controls designed to comply with their financial reporting obligations to the public,” said Michael Maloney, Chief Accountant of the SEC’s Enforcement Division. “VSOE is a critically important component in determining the timing in which software companies recognize revenue, and JDA’s internal accounting controls surrounding VSOE were inadequate in various ways.”
JDA software, changed leadership in May 2014 with a new chief executive officer (CEO) Baljit (Bal) Dail, who served as JDA’s chairman since May 2013. In December of 2012, JDA merged with RedPairie, a computerized warehousing and distribution solutions and services company.
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