A recent settlement with United Parcel Service (UPS) sees the company paying a hefty $45 million fine. The charge stems from accusations that UPS misrepresented the value of its Freight division, a business they later sold to TFI International for $800 million.
Background: The U.S. Securities and Exchange Commission (SEC) highlighted UPS's oversight in financial reporting. They claimed UPS did not adhere to accepted accounting principles when gauging the Freight division's worth.
- UPS was found to have used an inflated valuation of $2 billion from an external consultant rather than its own analysis, which valued it around $650 million.
- This misstep led to the company avoiding necessary impairments on the business's goodwill during 2019 and 2020, stated the SEC findings.
Transaction details: UPS announced the sale of its Freight division to TFI International in early 2021. The decision aligned with UPS's strategy to focus more intensely on their core package delivery services, reported UPS.
In essence: With over 85 years of history in the less-than-truckload sector, the Freight division's transition is a substantial shift for UPS.
- Under new management, UPS Freight will continue leveraging UPS's domestic networks for its services for another five years.
UPS can absorb this fine without compromising its operations, reflecting its capacity to manage financial setbacks effectively.