Under Armour: Revenue Pull Forwards and Disclosure Failures

Abstract

This case examines a recent SEC settlement with Under Armour, a public company traded on the NYSE, that was charged with misleading investors and failing to disclosure uncertainties relating to its reported revenues. Under Amour was not able to meet analysts’ sales projections for several consecutive quarters in 2015 and 2016 and resorted to “pulling forward” revenue from future periods in order to meet these estimates. More than $408 million was pulled forward, and during this time Under Armour continued to credit its growth to apparel, footwear and other new offerings. The case was settled in May 2021 and Under Armour paid a $9 million penalty. The case spotlights several important accounting and ethics issues in the context of a real, multi-national company that most college students are familiar with. From an accounting perspective, the revenue pull forwards, manipulation of payment terms and omission of material facts in financial reporting are discussed. From an ethics perspective, a discussion is included on the timing of reporting “earned” revenue, the legality of inducing customers to accept early shipments and the difference between omitting information and misleading investors.