Defusing the Steinhoff Accounting Scandal

A response received by Steinhoff is to appoint three board members to keep a close observation on the firm. The firm has dropped 11 billion euros from its initial market value due to a balance sheet debacle.

Working with the auditors of Deloitte LLP, the owner of France, Conforama, U.K, Poundland. and U.S, Mattress Firm were required to publish the full financial results but was delayed indefinitely after the firm had found irregularities in the accounting books right at the same time where Mark Jooste, the Chief Executive Officer of Steinhoff had posted his resignation. Other than the financial results getting delayed, Steinhoff also postponed the annual meeting in London by eight days stating that they do not have enough financial information to discuss with the bankers. This may imply that Steinhoff plans to release the earned funds during a provisional phase.

Steinhoff news reported that the firm has also confirmed that there will be an ongoing investigation by PricewaterhouseCoopers, to uncover intricate details that had led to the scandal and the 84% share price that collapsed within three days. Moreover, 18 billion euros were exposed to the company by the creditors and lenders which it started at South Africa before expanding global wide.

By the end of March, Steinhoff’s first-half earning revealed that there were 12.12 billion euros of long-term liabilities were 12.1 billion euros and 5.87 billion euros of short-term liabilities. Other than lenders and creditors, banks are also exposed as the loans given to Christo Wiese, the Chairman of Steinhoff on his investment vehicles. In 2016, Wiese was the largest shareholder of the company that had promised that the 628 million of Steinhoff shares will be used as collateral to get a loan from Citigroup, Goldman Sachs Group Inc, HSBC, and also, Nomura Holding Inc. The company stated that they were to join in a share sale in regards to the addition of Mattress Firm and Poundland.

Furthermore, the firm has considered in boosting liquidity by selling off 1 billion euros worth of their assets. Also, one of its South African branches would have long-term liabilities that total to another 1 billion euros, while the investigation of the possibility of restoring the 6 billion euros worth of assets. These actions taken by the firm after the Steinhoff scandal may help the firm recover some of the funds that are owed to the line of investors and banks.