Laureate Education is a global network of higher education institutions that offers undergraduate and graduate degree programs to students in more than 70 countries. The company has faced a number of accounting-related issues in recent years, which have had a significant impact on its business operations. This essay will discuss the impact of these issues on Laureate Education’s financial performance, reputation, and growth prospects.
Background
Laureate Education has faced a number of accounting-related issues since it became a publicly traded company in 2017. In October of that year, the company disclosed that it was under investigation by the Securities and Exchange Commission (SEC) for possible violations of the Foreign Corrupt Practices Act (FCPA) in its operations in Brazil. The company’s shares fell by more than 14% on the news.
The investigation focused on allegations that Laureate Education made improper payments to government officials in Brazil in exchange for regulatory approvals and other benefits. The company denied the allegations but acknowledged that it had identified certain “material weaknesses” in its internal controls over financial reporting related to its operations in Brazil.
In May 2018, the company disclosed that it had received a subpoena from the SEC seeking documents and information related to its operations in Chile. The company said that it was cooperating with the investigation but did not provide further details.
In June 2019, the company announced that it had restated its financial statements for the years 2014 through 2018 due to accounting errors related to its Chilean operations. The restatement reduced the company’s previously reported net income by $100 million and increased its previously reported debt by $300 million.
Impact on Financial Performance
The accounting-related issues have had a significant impact on Laureate Education’s financial performance. The company has incurred significant legal and accounting fees related to the investigations and restatements. In its 2019 annual report, the company reported that it had incurred $61.4 million in legal and professional fees related to the investigations and restatements.
The restatement of the financial statements also had a negative impact on the company’s financial performance. The restatement reduced the company’s previously reported net income by $100 million and increased its previously reported debt by $300 million. The company’s stock price has also been affected by the accounting-related issues. Since the company went public in 2017, its stock price has fallen by more than 70%.
Impact on Reputation
The accounting-related issues have also had a significant impact on Laureate Education’s reputation. The investigations and restatements have raised concerns about the company’s internal controls and corporate governance. In its 2019 annual report, the company acknowledged that the investigations and restatements had “resulted in negative publicity and reputational damage.”
The company’s reputation has also been affected by allegations of wrongdoing in its operations in Brazil and Chile. The investigations have raised questions about the company’s compliance with anti-corruption laws and its commitment to ethical business practices.
Impact on Growth Prospects
The accounting-related issues have also had an impact on Laureate Education’s growth prospects. The company has been focused on expanding its operations in emerging markets, particularly in Latin America, Asia, and the Middle East. The investigations and restatements have raised concerns about the company’s ability to manage its operations in these markets and comply with local regulations.
The company has also faced increased competition from other higher education providers in these markets. In its 2019 annual report, the company acknowledged that it faces “significant competition” from both traditional and online higher education providers in its key markets.
Conclusion
In conclusion, Laureate Education’s accounting-related issues have had a significant impact on its business operations. The investigations and restatements have resulted in significant legal and accounting fees, reduced financial performance, and reputational damage. The company’s growth prospects have also been affected by concerns about its ability to manage its operations in emerging markets and compete with other higher education providers. The company will need to take steps to address these issues and restore investor confidence in its business.
