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Poshmark Discovers New Accounting Errors While Correcting Three Years of Financials
The secondhand marketplace has overstated revenue for a third consecutive year.
May 16, 2022
Poshmark (POSH), a second hand fashion marketplace, is quantifying the impact of three years of accounting errors including newly discovered errors related to revenue. The company originally revealed in its latest annual report that it had identified prior period errors in its previously issued financial statements as of December 31, 2020 and for the years ended December 31, 2020 and 2019, as well as the first three quarters of 2021.
These errors primarily related to Poshmark’s calculation and recording of credit card chargebacks from one of its payment processors, which resulted in the:
-Overstatement of G&A expenses
-Understatement of cash and cash equivalents
-Overstatement of accrued expenses and other liabilities
Though the company claims the errors aren’t material, it is revising its previous financial statements. Notably, the company suggests that during the revision process, it discovered other errors:
“In connection with such revision, the Company also correcting for other immaterial misstatements, primarily related to the recording of income taxes and misclassification of marketing expenses and net revenue.”
In its latest quarterly filing, Poshmark corrected its financials for the three months ended March 31, 2021, revealing:
-Poshmark overstated revenue by $229,000
-Poshmark overstated its net loss by $381,000
-Poshmark understated operating cash flow by $394,000
It’s the third consecutive year Poshmark initially overstated its revenue. In 2019 and 2020, Poshmark overstated sales by a combined $718,000.
Expect more revisions ahead. The company will correct its 2021 financials in each of the first three quarters of 2022.
Related: RENT, M, KSS, CPRI, VFC, SFIX
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