Current Events > SOX Compliance question for the reCEdent accountants

(+) Yeah! (+)

Not sure who to tag, who are the accountants on CE again?

I will try to simplify this as much as possible but this is corporate finance voodoo shit.

Ok, so in my division in procurement, we have a few ways to release purchase orders, this is the way that is concerning me.

~80% of our spend is done via long term agreements or Master Contracts. These Master Contracts are not an obligation to buy so they are not reported on our financials. They have a not-to-exceed value and terms and conditions attached to them but do not have a statement of work attached to them. In order to spend part of the NTE value, a purchase order is released with the statement of work. These purchase orders are released for the monthly spend only. But typically a non-system PO is placed in January each year for the work statement for the full value of the year. This non-system PO is not reported anywhere in our financials and are completely off the books.

So a Master contract of $1.2B for 10 years is released to Acme, Inc.
On January 1 a non-system PO is sent to the supplier, signed, and worked to. That non-system PO is for $120M for the year. Each month then a $10M system released PO is sent to the supplier for them to invoice against.

My concern is that as of January 1, that entire $120M should become an obligation on the books but we do not report it on January 1, we report the system released POs each month.

Is this SOX compliant?

I am being told by my leadership to drop the issue, that it has already been worked and resolved and this is what we are doing, but it just feels wrong.
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@Gheb
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thanks!
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I'm not sure how much good I'll be here. All of my client base are private companies and thus not subject to SOX compliance. That said, I don't believe you need to have the contract or the PO's actually recorded on the books with that set-up.
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