Hertz

On May 13, 2014 Hertz, based in Naples, Florida, notified the SEC that it wouldn’t be able to file its quarterly report (known as Form 10-Q) on time. In the filing Hertz disclosed that additional work was needed in order to complete the closing procedures associated with the first quarter primarily related to evaluating the company’s conclusions regarding the capitalization and timing of depreciation for certain non-fleet expenditures in prior periods. Hertz asserted that the 10-Q would be filed no later May 19th, which came and went and the company did not file its 10-Q. Instead, On June 6th Hertz issues a 4.02: non-reliance guidance for its previously issued financial statements. Hertz Global Holding said it would restate or correct financial results for the past three years to fix accounting errors originating in 2011. Resulting in stocks immediately down.

The question that came to many minds; Were there any signs of accounting trouble at Hertz leading up to this restatement? Well, research shows looking over the recent history of Hertz SEC filing, one might notice some early indications of potential trouble. In November 7, 2011 the company reported that they identified certain errors in their previously issued consolidated financial statements. The errors were related to additional telecommunication charges and depreciation of revenue earning equipment. In the third quarter of 2013, the CFO resigned, which was obviously a key position in the accounting structure of the company and another red flag tracked by Audit Analytics. Studies are show were Hertz made a sequence of changes in accounting estimates related to its depreciation rates for its US rental car segment. Note that, changes in accounting estimates are one of many red flags highlighted. Generally, by the time a restatement hits the market it’s already too late. Investors made a mistake by overlooking the filing issues of this company as well as the red flags. Maybe if these was addressed during the...