Bristol-Myers Squibb (BMS) is a multinational pharmaceutical company founded in 1989 from two other companies founded in the 1800s. It is headquartered in New York City with revenues of over $9 billion and almost 30,000 employees worldwide. The company manufactures pharmaceuticals in several therapeutic areas: cancer, cardiovascular disease, diabetes, hepatitis, rheumatoid arthritis, HIV, and psychiatric disorders. The company's primary research sites are located in New Jersey, Connecticut, Belgium, Tokyo, and Bangalore, India. The company has had some rough times in the past few years, and has been involved in a major restructuring that focuses on both the pharmaceutical and biological products divisions. This restructuring also includes productivity initiatives and cost-cutting/streamlining business operations through a program of layoffs and reduced subsidies for retirees and pensions plan reductions (Dey, 2010). Accounting Fraud - BMS was involved in a major accounting scandal in 2002 that resulted in the need to drastically restate revenues for the three years of 1999, 2000, and 2001. This was the result of booking sales of excess inventory to customers to create higher sales number,...
Essentially, BMS was accused of fraudulently forcing more products through the distribution channels than could possibly be delivered, usually based on the short-term objectives of making quarterly sales goals but detrimental to the long-term health of the company and the truth and transparency of taxable profits towards shareholders. The process has a number of long-term consequences to the company. Not only does it distort the books, but distributors often return unsold goods that cause fluctuating demand, excess inventory and spiraling distribution control problems. According to the U.S. Justice Department and SEC, BMS:
As opposite, in private sector accounting (for the purpose to improve the financial position of the company) the sales are recognized when the products or services have been rendered and the payment has been received or is expected to be received in a very short time. The costs are recognized as deduction from income if there is a subjective view that these costs are to lead to future income
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