Hit of Rs 1,500 cr on Reebok India irregularities: Adidas

The Gurgaon Police had later reduced the size of the estimate to a far lower Rs 11.3 crore

German sportswear maker Adidas Group on Thursday said that it has taken a hit of 211 million euros almost Rs 1,500 crore after completing the assessment of the financial irregularities at the Indian operations of Reebok.

With the inclusion of material misstatements,it has thus corrected the consolidated financial statements for calendar year 2011 and for previous years,as reported in the full year CY2012 results.

The results of these restatements led to a reduction of net income attributable to shareholders of 58 million euro Rs 412 crore for 2011. In addition,shareholders equity of the opening balance sheet for 2011 is negatively impacted by 153 million euros Rs 1,086 crore, Adidas said.

The total hit to the firm is higher than the initial estimate of Rs 870 crore 125 million euros as per the exchange rate at the time submitted to the Gurgaon police by the company in an FIR in May last year. The Gurgaon Police had later reduced the size of the estimate to a far lower Rs 11.3 crore. Herbert Hainer,Adidas Group CEO,said in the statement,As we announced last April,we discovered commercial irregularities at our Reebok business in India,bringing to light a high level of criminal energy and collusion between former employees and external business partners.

He added,Key findings from our internal investigations include inappropriate recognition of sales,a failure to book sales returns and a failure to correctly post credit notes to accounts receivable. This resulted in a significant overstatement of net sales,accounts receivable as well as materially incorrect accounting for inventories and provisions.

During the investigation process,the new management also discovered four previously undisclosed warehouses . The findings of the investigations suggest that the practice of inflating sales and profits had been going on for several years, he said. FE