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Tandy Leather Factory, Inc. Message Board

  • enron_accountant enron_accountant Apr 2, 2010 4:43 PM Flag

    Are the Books Straight?

    Current 10-K shows 283 days inventory

    Last year 262 days...

    How can an accounting firm (unless they are in Texas) allow a
    10-K to go out with such absurd numbers???

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    • 413 days inventory at cost!!

      to quote a previous poster


      "There is no other company on the exchange where their accountants
      will allow them to publish such absurd numbers for fear of being
      accused of creative accounting. Creative accounting is in fashion
      in the new Obama administration. TLF's accountants are setting
      a new standard by which to be measured.

      Good luck to all of you who are not on the inside."

      • 1 Reply to spfiter
      • Interesting that the issue of inventory and it's accounting have dragged on for over two years. In that time Mgt has paid a large special dividend and the stock is up 43%.
        I agree inventories are large. However if leather prices continue rising the inventory of leather is money in the bank. Shelf life for leather is many years. I have leather that is over 15years old and still in good condition. Leather bound books last centuries.

    • wall_street_home_of_the_thieves wall_street_home_of_the_thieves Sep 3, 2010 11:15 AM Flag

      http://www.allbusiness.com/accounting-reporting/auditing/477762-1.html



      Reports in the Wall Street Journal about recent cases involving inventory errors and irregularities show that inventory fraud is increasing. For example, in 1992 at Comptronix Corporation, an electronics company, profits were overstated by making false entries that increased inventory and decreased cost of goods sold.(3) Similarly, managers at Leslie Fay Company overstated income by making $80 million in false entries for 1991 and 1992. Leslie Fay Company overstated inventory and understated the cost of making the inventory in order to overstate profits. The irregularities at Leslie Fay were detected by the external auditor.(4)

      In 1990, Laribee Manufacturing Company obtained $130 million in loans using as collateral inventory that either did not exist or was carried on the books in excess of market value. Also, Laribee carried shipments between two locations as inventory at both locations. Fictitious documents were created to support the fictitious inventory.(5)

      In the widely-publicized Phar-Mor case, managers allegedly embezzled from the company and covered up their actions by making false entries to the inventory records. They hid the embezzlement and the false entries from the auditors by monitoring the auditors' test count procedures. The auditors test-counted five of the 200 Phar-Mor stores and informed management in advance which stores were to be tested. Phar-Mor executives allegedly adjusted the inventory at the stores not tested by the auditors.

      Review of Auditing Procedures

      Current auditing standards require auditors to pay considerable attention to the management assertion that inventory quantities exist. This assertion is verified primarily by reviewing the client's inventory counting procedures, observing the client count of inventory quantities, test-counting a sample of the total inventory, and tracing the test counts to the final inventory listing prepared by the client. If the auditor's test counts agree with the client count, and there are no other indications of possible misstatement, auditors may rely on the internal control provided by the client's inventory counting procedures and accept the final inventory count as valid.

      Statement on Auditing Standard No. 53 requires the auditor to plan for the audit by assessing the risk of "errors and irregularities," including fraud, that cause material misstatements in the financial statements.(6) If the risk of errors or irregularities is high, the auditor is required to design the audit program to detect possible material misstatements. Assessing the risk of misstatement of inventory should occur prior to observation of the inventory count.

      Look for Unusual Circumstances During the Risk Assessment Phase

      Auditors must approach the audit engagement with an attitude of "professional skepticism." Early in the planning stage, auditors should look for circumstances or combinations of circumstances that could make fraud or intentional misstatement more likely. For example, if the company has a large amount of inventory relative to other assets and is also struggling with low profitability, this combination of circumstances may encourage fraud or intentional misstatement of inventory.

    • wall_street_home_of_the_thieves wall_street_home_of_the_thieves Aug 19, 2010 11:56 AM Flag

      I'm just the messenger. Don't shoot me!!!

      The days of inventory is a calculation. The numbers are the numbers. If this were "ordinary" times, the stock would be worthless, the accountants would be receiving questions from the SEC and the creative writers of the 10Q's & 10K's would be.... who knows & who cares....

      Again, these are just numbers... there are 299 days inventory... ask an accountant, banker, stock analyst or your dog what does this imply. I leave the conclusions to you.

      The only issue is the numbers... they are what they are....who points it out to you doesn't change them....

      My suggestion to you is Semper Fi

    • wall_street_home_of_the_thieves wall_street_home_of_the_thieves Aug 17, 2010 9:28 PM Flag

      Sum trailing 4 quarters of cost of goods sold = 22,104,000

      Divide most recently reported inventory, 18,110,000 by above sum
      and multiply by 365 (that's how many days there are in a year for
      those of you who spend a lot of time sniffing solvents) and
      guess what you get?

      The number of days of inventory currently being held.

      The answer is 299 days!!!!

      Watch out for the insiders.

    • wall_street_home_of_the_thieves wall_street_home_of_the_thieves Aug 16, 2010 1:56 AM Flag

      I love this company. They so boldy step where no accountant would
      dare to go.

      Sum trailing 4 quarters of cost of goods sold = 22,043,000

      Divide most recently reported inventory, 16,866,000 by above sum
      and multiply by 365 (that's how many days there are in a year for
      those of you who spend a lot of time sniffing solvents) and
      guess what you get?

      The number of days of inventory currently being held.

      The answer is 279 days!!!!

      There is no other company on the exchange where their accountants
      will allow them to publish such absurd numbers for fear of being
      accused of creative accounting. Creative accounting is in fashion
      in the new Obama administration. TLF's accountants are setting
      a new standard by which to be measured.

      Good luck to all of you who are not on the inside.

    • If you visit a store it is evident that they carry large inventories of finished and semi finished goods. One must recognize that a lot of purchases (such as stamps etc) are impulse items The Company does a lot of cataloge sales and ships from the nearest store point. Most items are not fashion or computers that have short life cycles. Tandy probably has SKU's that are 50 years old and still selling. Not much risk in most the Company's inventory. The key is that the items are available when the customer wants them. Ever try to bur leather related items in "hobby or craft stores like Micheals" There is next to nothing there.
      Consider TLF inventory an asset that competitors would find difficult to emulate.

      • 2 Replies to jamesbird79
      • It's nice to see a couple of people have an
        understanding of accounting:

        a) In response to James statement, I only need quote TLF's own words in an earlier 10-K which are: (so James, even TLF disagrees with your analysis)

        Tandy Leather's inventory turns are significantly higher than that of the
        Leather Factory because its inventory consists only of the inventory at the
        stores. Tandy Leather has no warehouse (backstock) inventory to include in the
        turnover computation as the stores get their product from the Leather Factory
        central warehouse. Leather Factory's turns are always slower because the
        central warehouse inventory supports the stores and distribution centers.

        b) The days inventory increases from year to year. There are no other healthy businesses with this type of reported data:

        2009 282 days
        2006 266 days
        2005 260 days
        2004 225 days
        2003 212 days

        Increasing days of inventory indicates a problem. It doesn't take a genius to figure this out.

        No one wants to acknowledge this. Some of the simpletons on this board seem to have their own agendas, like monkeys who see not, hear not, and cannot speak correctly. What's the point to write about anything else?

      • Good post. Thanks. I still wonder about their systems though (not their accounting, as I think I have made clear).

    • Yes, facts are fine. Yes, they might be able to do a better job with inventory but then again it may be due to the business model. However, to insinuate that the books are not straight in some enron style situation is totaly absurd and is to what I take exception. I that what you really think????

    • I worry less about the agenda than the facts. Clearly, it seems like they need to do a better job with inventory (cf my previous allusion to JAS; what I didn't mention, is that JAS also sold off at big sale some unwanted inventory, though I don't recall it being at a loss).

    • Re: 280 days inventory? 9-Dec-08 10:50 am "And, how come the founders sold all their stock at the high and the stock has dropped like a rock ever since? Can someone speak to this?"

      Unfortunately, the SEC cannot look into every case deemed suspicious. Or in this case, obvious.... Rating :
      (No ratings)Rate it:
      heather_blu...


      Female
      Fort Worth,...

    • I have no clue to where you are getting those numbers but you might want to clarify.

      On page 11 of the 10K, the company reported inventory turn over of 3.35 times which is 109 day by dividing into 365. Inventory ended at 16.9 mil compared to 54.5 mil in sales which is consistent with this figure. While it would be great if this was lower, it is not out of line or indicating any problem with the books.

      I find it unusual for a brand new poster that might want to instill fear pops up with a name associated with enron. Nice try. Go haunt a house.

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