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Inspired Unsure Whether Software Development Projects Were Completed
Gaming firm understated amortization expense after allegedly mistaking completed projects for works in progress.
September 1, 2023
Inspired Entertainment Inc. (INSE), a gaming technology company, overstated its 2022 profitability due to accounting issues related to capitalized software expenses. The company improperly categorized certain projects as works-in-progress rather than completed projects.
Amortization expense does not commence until a project is complete.
The error resulted in the company understating expenses and overstated 2022 net income by $1.1 million, or 4.5%.
The out-of-period adjustment was made in a filing for the quarter ended June 30, 2023, which was submitted late to the Securities and Exchange Commission (SEC).
Fortunately for management, cash bonuses are calculated on Adjusted EBITDA,, which suggests no compensation clawback is forthcoming as Inspired’s Board ignores amortization regardless of whether it’s calculated accurately.
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