The SEC has just filed a complaint against Sequential Brands Group,
Inc., a brand management company, for failing to take timely and
appropriate goodwill impairment charges as required by GAAP and the
federal securities laws, despite "clear evidence of goodwill
impairment" (according to the press release). As a result, the SEC alleges,
the company "materially understated its operating expenses and
net loss and materially overstated its income from operations,
goodwill, and total assets" in its SEC filings, turning
"a net loss into income" for financial statement
purposes.
According to the complaint, Sequential acquired consumer brands
through acquisitions, creating substantial goodwill on its balance
sheet. As of December 31, 2016, goodwill represented $307.7
million, or 21.4%, of its total assets. During 2016 and 2017, the
company's "industry sector performed poorly," and its
stock price steadily plummeted. During just the fourth quarter of
2016, its stock price
