Fogdog, an online sporting goods store was asked by the SEC to reclassify about $1.5 million in fulfillment costs (such as giveaways and shipping costs) as COGS. In other words, the company was asked to move $1.5 million from Operating Expenses to COGS. This move resulted in the price of the firm dropping by about 90%. The As Reported column is what company initially reported. The Restated numbers are what the company reported following the re-classification required by the SEC. Briefly explain why you think the market reacted so negatively?

Answer rating: 100% (QA)

The markets negative reaction to Fogdogs reclassification of fulfillment costs from Operating Expenses to Cost of Goods Sold COGS can be attributed to ... View the full answer