Market Roundup: The shocking truth about Americanas

The shocking truth about the Americanas balance sheets

Investors, analysts, and C-level executives knew it would be bad, but maybe not that bad. Americanas, one of Brazil’s largest retailers and the protagonist of the country’s biggest fraud case ever, has finally published its financial statements for the fiscal years 2021 and 2022.

• When the market was alerted to its “accounting inconsistencies” in January of this year, Americanas suspended the release of the results because it needed to re-examine everything under a microscope.

State of play. The 2021 net profit of BRL 731 million (USD 150 million) was revised to a net loss of BRL 6.23 billion, and last year’s results were corrected to a net loss of BRL 12.9 billion.

• The company also released projections for its strategic business plan, expecting its net worth to be positive in 2025 — from a net debt of BRL 26.7 billion in 2022.

The fraud. The largest adjustments occurred in the company’s cost of goods sold, due to fictitious cooperative advertising budget agreements (VPCs) that were eliminated, in addition to inflated forfait and working capital transactions and their effects on financial results and taxes.

• The VPCs were recorded as a reduction of the cost of goods sold, artificially improving the retailer’s operating results. In addition, these entries ended up reducing the accounts payable;
• Also, financial forfaits were entered into to meet the company’s cash needs and were also improperly recorded in accounts payable, thereby neutralizing the recording of VPCs in the same account;
• The financial costs of the forfait transactions (and working capital) were also improperly entered into accounts payable, not being recorded as financial expenses as they should have been.

Why it matters. The publication of the balance sheets was the first piece...