Bassett Furniture: In A Bind

Feb.13.07 | About: Bassett Furniture (BSET)

Bassett Furniture Industries (NASDAQ:BSET) filed a non-reliance 8-K yesterday on its financial statements for 2005. Specifically, the 2005 and 2004 balance sheets contained in that year’s 10-K are flawed.

And it’s not an options deal or derivatives accounting done wrong that generates the disclaimer. It’s a good old-fashioned pension mishap: the firm “determined that previous actuarial assumptions and calculations associated with the death benefit, mortality and discount rates used in the actuarial valuation for the unfunded Supplemental Retirement Income Plan ('the Plan') were not correct.”

According to the filing, there was no material effect on pension cost, but the pension obligations were understated by a sufficient amount to warrant restatement.

Rather than restate the entire set of financials, the firm will be treating it as a correction of an error - though the circumstances surrounding the error remain unexplained in the filing - and will adjust the beginning of period retained earnings at the start of the financial statements presented. All told, liabilities will grow about another $5.6 million; assets, by about $2.2 million. Equity gets chipped for the difference - a reduction of about 2% based on the August period figures.

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