For the second time in less than three years, internet retailer Overstock.com is issuing a restatement of its finances due to implementation problems with its Oracle enterprise resource planning (ERP) system.

In 2006, Overstock.com issued its first restatement to correct an error relating to accounting for freight costs that the company charged immediately rather than at the time the inventory was sold.

Recently, Chairman and CEO Patrick Byrne issued a statement to shareholders stating the absence of manual, ground-up reconciliation is the cause of the current issues. According to Overstock.com management, the ERP system failed to reverse-out shipping revenues for cancelled orders which led to a build-up of these charges over time.

The company’s use of “reason codes” also played a role in the misstatements. Overstock.com used reason codes to track the reasons why it issued customer refunds. However, the new system did not automatically record all the codes requiring manual entry for some refunds, which the company failed to do. These unrecorded refunds also accumulated over time.

The restatement will most likely show a reduction in revenue by $12.9 million and an increase in the cumulative net loss by $10.3 million. Senior finance vice president, David Chidester, accepted responsibility for the company’s current financial situation citing Overstock.com has re-examined its policies and procedures for testing and verifying its balance sheet and has implemented processes to record refunds in the system.

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