SEC Probe Investigates Activision, Acclaim

Thanks to Yahoo! for passing on a brief press release from Activision and a similar release from Acclaim indicating they are "..part of a formal probe by the U.S. Securities and Exchange Commission into video game industry accounting practices." According to a separate Forbes article, Acclaim "..said the formal, non-public inquiry is entitled 'In the Matter of Certain Video Game Manufacturers'", meaning that other games publishers may also be under investigation - we'll update if any other publishers make similar announcements. Update: 07/18 23:59 GMT by S : According to this Reuters article, THQ is also involved in the inquiry, and analysts suggest an "..industrywide investigation would represent an unusually wide scope for a regulatory probe."

Comments

Price fixing maybe?

[SuperguyA1]

Could this include the fact that all video games seem to come out for exactly the same price?
(Please don't flame, I don't know if this is SEC jurisdiction. That's why I'm asking).

Re:Price fixing maybe?

[AndyBusch]

Nor do I, but I don't think price fixing counts as part of an accounting investigation. I think price-fixing would be more the jurisdiction of the Federal Trade Commission. Also bear in mind that the article even is fair enough to note that being part of a probe is not intrinsically any indication of guilt.

Also, regarding price-fixing, stores have sales on games fairly often. If they never did, then the fixing issue may come into play more.

I'm still waiting on my check from the RIAA ;)

Huh

[nelsonal]

The only weird accounting issue that I can think of for game companies has to do with their reserves of unsold product. The retail outlets are allowed to send back unsold products after a certain period of time, and becuse of these agreements, the video game makers are supposed to estimate how much product they expect to have returned, and then reduce their revenue by that amount. Anytime you let managment estimate something, it opens the door for games, managment can under reserve and raise current earnings (at the cost of future earnings) or they can over reserve to lower current earnings, and raise those in a future period. Can anyone else think of some other accounting games that these types of companies can play?