SEC Fines UPS $45 Million for Improper Valuation of Freight Business

reed to pay a $45 million settlement fee following a complaint from the U.S. Securities and Exchange Commission. The SEC claimed that UPS improperly valued one of its business units, specifically the UPS Freight unit that was sold in 2021.

The SEC found that UPS had misrepresented its earnings by not following the generally accepted accounting principles (GAAP) in valuing this underperforming business. UPS did not admit or deny the allegations but agreed to the settlement terms, which include a civil penalty and additional compliance measures.

In 2019, UPS estimated that UPS Freight would sell for $350 million to $650 million, signaling impairment of nearly $500 million in goodwill associated with the unit. However, UPS did not use this analysis and instead relied on an external consultant’s valuation, which was significantly higher at around $2 billion.

This discrepancy led to UPS not recording a goodwill impairment in 2019, which can have a significant impact on a company’s earnings. Despite negotiations to sell UPS Freight for a lower value, UPS did not disclose these events and continued to rely on the consultant’s valuation.

The SEC emphasized the importance of companies accurately valuing their assets and impairing goodwill when necessary, pointing out UPS’s failure to do so. While the investigation with respect to UPS has concluded, the SEC’s overall investigation is ongoing, and UPS is required to cooperate fully.

Overall, while the settlement will not materially affect UPS’s business or financial condition, it serves as a reminder of the importance of following accounting principles and accurately valuing assets. UPS has committed to compliance measures to prevent similar issues in the future.