Video Game Industry Facing SEC Probe

Activision Inc., THQ Inc., Acclaim Entertainment Inc. and Midway Games Inc. have disclosed that the SEC has requested information from each of them, indicating a wide-scale investigation may be under way into accounting practices in the video-game software publishing sector.

No one is commenting on what the investigation is covering but one industry analyst speculated to UPI that the SEC might be looking at whether the industry has been understating revenue so it can artificially inflate earnings later. Stocks of all four companies fell on the news of the SEC inquiry.

The companies, which publish games for Sony Corp.’s PlayStation 2 and Nintendo’s GameCube, among others, told the Los Angeles Times that they are cooperating with the probe. The industry leader, Electronic Arts Inc., was not named on the list of companies facing SEC scrutiny.

Activision’s filing stated that, "The investigation appears to be focused on certain accounting practices common to the interactive entertainment industry, with specific emphasis on revenue recognition," another way of saying when companies choose to record sales on their books.

Michael Pachter, a research analyst with Wedbush Morgan Securities Inc. in Los Angeles, told the Washington Post that he sees no threat to the industry from the SEC inquiry.
"I think that the probe is literally just the SEC trying to determine whether the interest of investors is being served by industry practices," he said. "There’s definitely no smoking gun here…I think these companies are all running their businesses above board."

The SEC’s probe into Take-Two Interactive Software Inc. was ongoing before the probe widened to a broader look at the industry. Take-Two, publisher of the Grand Theft Auto games, last year restated seven quarters of earnings to account for sales that had been shown as revenue but were later returned or repurchased by the company.

You may like these other stories...

The US Securities and Exchange Commission (SEC) has chosen a former partner and vice chairman with Deloitte LLP as its new chief accountant.James Schnurr, who specialized in financial and SEC reporting for public companies...
Summer is a time for kicking back and playing a few round of golf with friends, for example. But if you're on the green, you'd better be careful: The SEC may be looking over your shoulder.In July, the SEC announced...
An examination initiative launched by the US Securities and Exchange Commission (SEC) earlier this week will enable the agency to evaluate whether municipal advisors are complying with new SEC rules that went into effect...

Already a member? log in here.

Upcoming CPE Webinars

Sep 24
In this jam-packed presentation Excel expert David Ringstrom, CPA will give you a crash-course in creating spreadsheet-based dashboards. A dashboard condenses large amounts of data into a compact space, yet enables the end user to easily drill down into details when warranted.
Sep 30
This webcast will include discussions of important issues in SSARS No. 19 and the current status of proposed changes by the Accounting and Review Services Committee in these statements.
Oct 21
Kristen Rampe will share how to speak and write more effectively by understanding your own and your audience's communication style.
Oct 23
Amber Setter will show the value of leadership assessments as tools for individual and organizational leadership development initiatives.