Leading Dutch food retailer Ahold announced earlier this week that it had uncovered accounting irregularities relating to its US Foodservice unit which effectively meant that its profits had been overstated by as much as $500 million.
Ahold said on Monday that it would have to restate its accounts dating back as far as 2000 - and added that it was also investigating possible irregularities at its Argentine unit Disco. Following the announcement, Ahold's shares have nosedived on the New York Stock Exchange, losing more than 65 per cent of their value.
The discovery of the irregularities has already cost the jobs of Ahold's CEO, Cees van der Hoeven, and its chief financial officer, Michael Meurs, but the ramifications of the affair are likely to continue for some time.
Not only is the company now facing lawsuits on behalf of disgruntled shareholders in the US who claim that they have lost money as a result of the plummeting value of the group's shares, but its revelations have also drawn the attention of EU officials, with Internal Market Commissioner Frits Bolkestein saying that cases such as this could be avoided if international accounting standards were harmonised.
"If it is a case of malfeasance, it only increases our desire to deal with the issue in a general way, and lends added urgency to get convergence of accounting standards," Bolkestein told reporters following a speech to the European Institute yesterday.
The US regulators do not allow European companies operating in America to use European accounting standards when stating their earnings, which Europe believes leads to a higher risk of irregularities such as this one. Furthermore, accounting scandals such as that which engulfed Enron last year has eroded the industry's faith in the efficacy of US accounting principles.