Forbes Magazine has given the ‘danger’ rating to North American action sports retailer, Zumiez. The reasoning behind the rating, according to the article, is that Zumiez “turned to an old account­ing trick to boost its 2010 earn­ings by 13%. Dig­ging through the foot­notes of its 10-K fil­ing, we found that ZUMZ increased the use­ful life esti­mate of its lease­hold improve­ments.This change in account­ing esti­mates reduces the company’s depre­ci­a­tion expense by $2.7 million after-tax and increases GAAP earn­ings by 13%. With­out this change in account­ing esti­mates, ZUMZ would have earned $0.70 per share in 2010, not $0.79.”

The actual change isn’t what triggered the rating but rather what it indicates – a company that is traveling well is highly unlikely to exploit accounting rules to make things look better.

The article is a really interesting read – head over here to check it out.

(Via Boardistan)