Delivering Rapid QOE Analysis to Resolve Complex Accounting Issues
AT A GLANCE
Challenges:
Accelerated timeline to complete a QOE
Material gaps in financial accounting demanded immediate attention
Securing CEO & CFO buy-in for the QoE investment
Key Takeaways:
Sell-side QoE execution aligned stakeholders and timeline
GAAP revenue and inventory issues identified and quantified
Sales process advanced successfully
OVERVIEW
Alantra, a technology-focused investment bank, engaged us to perform a quality of earnings analysis in support of the sale of Brickhouse Security. The company had never been audited or undergone a formal financial review, which increased the importance of validating underlying earnings. As part of the QoE, we reviewed Brickhouse’s key accounting policies and found that revenue was not being recorded in accordance with GAAP. We also identified that freight costs were not being capitalized into inventory, creating additional distortion in reported results.
ACTIONS
Deployed a specialist analytics team to extract and validate transaction-level data
Recalculated revenue under GAAP and corrected inventory costing by capitalizing freight
Translated findings into a buyer-ready QoE narrative and appendix for Alantra’s deal process
RESULTS
Enabled a rapid, collaborative QoE that kept the sell-side process on track
Identified and quantified material GAAP issues in revenue recognition and inventory costing
Developed a GAAP-compliant revenue recognition methodology that integrated nuanced data across consumer and business units
Increased leadership confidence in reported earnings and deal readiness
“We engaged Turning Point for a Quality of Earnings analysis during our sales process, on the recommendation of our investment bank. Despite our initial hesitation about incurring the cost of a QOE report, it proved to be a very smart decision.
Turning Point did an excellent job on the QofE. They worked seamlessly with our team without disruption and completed the process on time. Our revenue recognition was particularly complex due to our subscription model, churn rates, and marketplace channels like Amazon. The team navigated these challenges impressively, incorporating nuanced data across our consumer and business units.
They also helped us resolve issues like capitalization of freight costs and tackled the intensive ASC 606 revenue recognition requirements, which was critical for us. There is no doubt in my mind that we would use Turning Point again for a QofE. They were professional, thorough, and instrumental in preparing us for a successful acquisition.”
-GARY RONES, CFO, BRICKHOUSE SECURITY
