Accounting Practices of Bmy Bristol Myers Squibb

Bristol-Myers Squibb (BMS) is a multinational pharmaceutical company founded in 1989 from two other companies founded in the 1800s. It is headquartered in New York City with revenues of over $9 billion and almost 30,000 employees worldwide. The company manufactures pharmaceuticals in several therapeutic areas: cancer, cardiovascular disease, diabetes, hepatitis, rheumatoid arthritis, HIV, and psychiatric disorders. The company's primary research sites are located in New Jersey, Connecticut, Belgium, Tokyo, and Bangalore, India. The company has had some rough times in the past few years, and has been involved in a major restructuring that focuses on both the pharmaceutical and biological products divisions. This restructuring also includes productivity initiatives and cost-cutting/streamlining business operations through a program of layoffs and reduced subsidies for retirees and pensions plan reductions (Dey, 2010).

Accounting Fraud - BMS was involved in a major accounting scandal in 2002 that resulted in the need to drastically restate revenues for the three years of 1999, 2000, and 2001. This was the result of booking sales of excess inventory to customers to create higher sales number, called channel stuffing. Essentially, BMS was accused of fraudulently forcing more products through the distribution channels than could possibly be delivered, usually based on the short-term objectives of making quarterly sales goals but detrimental to the long-term health of the company and the truth and transparency of taxable profits towards shareholders. The process has a number of long-term consequences to the company. Not only does it distort the books, but distributors often return unsold goods that cause fluctuating demand, excess inventory and spiraling distribution control problems. According to the U.S. Justice Department and SEC, BMS:

engaged in a series of anticompetitive acts over the past decade to obstruct the entry of low-price generic competition for three of Bristol's widely used pharmaceutical products: two anti-cancer drugs, Taxol and Platinol, and the anti-anxiety agent BuSpar. Bristol avoided competition by abusing federal regulations to block generic entry; deceived the U.S. Patent and Trademark Office (PTO) to obtain unwarranted patent protection; paid a would-be generic rival over $70 million not to bring any competing products to market; and filed baseless patent infringement lawsuits to deter entry by generics (FTC Charges, 2003).

Without admitting any liability, BMS agreed to pay a fine of $150 million to settle a Securities and Exchange Commission accusation that the company illegally inflated its sales and earnings in a series of accounting frauds. This was just days after the company also agreed to pay $300 million to settle a shareholder class-action lawsuit dealing with similar issues. BMS had been under investigation since 2002, and the agreement did not preclude additional civil penalties (Dash, 2004).

Conclusions- BMS, due to its issues with stakeholders and the SEC has put into place an Accounting Audit Committee that has a primary responsibility of overseeing the appropriate transparency and adherence to legal issues based on the rules from the SEC and the company's shareholders. This Committee consists of three or more independent directors who meet the requirements of the SEC, be adept in account practices, and serve a one-year term. They must meet at least six times annually and have the power to request officers, employees, or outside counsel to attend meetings and answer appropriate questions. The committee is chartered with several important responsibilities: