Publicis Groupe Denies Allegations of Inappropriate Accounting

By Erik Oster Comment

Publicis Groupe has issued a statement adamantly denying allegations of inappropriate accounting brought against it by French advisory group Gouvernance en Action, Gouvernance en Action director Fabrice Remon and French magazine L’Obs.

The contention is related to the treatment of €130m in cash and €20m in software credits from German software publisher SAP which accrued from a delay in installing SAP’s software.

“Publicis had to treat these 130 million as an exceptional product because it is non-recurring, and does not come from contracts won in the course of its operations,” Remon told More About Advertising. He contends that Publicis, with agreement form its auditors, instead treated the compensation as write-downs and operating income in an effort to improve its organic growth numbers.

Publicis contends it did not handle the accounting of the transaction inappropriately and claims it “provided all required clarifications to the charge in a letter addressed to Mr Fabrice Ramon, director of Governance en Action, on 31 March.”

“Publicis Groupe had a dispute with a software and IT services supplier,’ Publicis wrote in a statement. “This dispute was arbitrated and resulted in a settled resolution, covered by a confidentiality agreement, whereby Publicis Groupe would be compensated for the costs of the delays and difficulties it sustained.”

In the statement Publicis claims that the “accounting treatment has been validated by Group’s auditors, who confirmed that it was not necessary to mention this information in the notes to the financial statements relating to 2014 accounts nor in the annual report” and that “The Group communicated all this information to Mr. Fabrice Rémon as well as the journalist of L’Obs who questioned us in this respect.”

It concludes with Publicis stating it will reserve “all our rights for any damages that such publications may have on our stock price, the company or our shareholders.”

This all makes sense, because it’s not like Publicis has been accused of financial improprieties in the very recent past or anything like that.

Here is the statement in full:

Publicis Groupe [Euronext Paris: FR0000130577, CAC 40] would like to provide some clarifications regarding claims made by Gouvernance en Action publicized on 17 May 2017.

On 31 March 2017, the Group replied to a letter sent by Mr. Fabrice Rémon, Director of Gouvernance en Action, and provided him all required clarifications.

Publicis Groupe had a dispute with a software and IT services supplier. This dispute was arbitrated and resulted in a settled resolution, covered by a confidentiality agreement, whereby Publicis Groupe would be compensated for the costs of the delays and difficulties it sustained.

The compensation received by Publicis Groupe was allocated in Publicis Groupe’s accounts in part to the reduction of the book value of the balance sheet assets corresponding to the project, in part to the neutralization in the 2014 income statement of the extra costs incurred as a result of the delays, and in part to cover forecasted extra costs in the coming years as a result of the delays known by the Group.

This accounting treatment has been validated by Group’s auditors, who confirmed that it was not necessary to mention this information in the notes to the financial statements relating to 2014 accounts nor in the annual report.

The Group communicated all this information to Mr. Fabrice Rémon as well as the journalist of L’Obs who questioned us in this respect. We reserve all our rights for any damages that such publications may have on our stock price, the company or our shareholders.

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