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World's largest weed business makes blazing spreadsheet error

27th Feb 2019
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The world’s largest legal weed business had its accounts go up in smoke after a spreadsheet error caused it to underreport its losses.

Less than a week after posting its latest quarterly earnings, Canopy Growth had to issue a substantial correction. In the original filing, the company stated its adjusted EBITDA loss for the nine months ending 31 December 2018 as CA$52m (£39.6m).

Turns out the company’s actual losses were a lot, ahem, higher than initially reported. Under the refiled accounts submitted to the Canadian Securities Administration, the EBITDA loss amounted to CA$155m (£88.5m).

The culprit? A spreadsheet formula error. “The correction was made due to a formula error in the spreadsheet supporting the year to date adjusted EBITDA loss calculation,” Canopy Growth said in a press release. “The adjusted EBITDA loss for the three months ended as December 31, 2018 was correct as reported, as were all prior quarters as released.”

Thankfully for Canopy, the bleeding was minimal and the company said no other changes were required to the filing. While the company’s stock fell 2%, its actual earnings report is extremely positive.

Revenue for its fiscal third quarter surged 282% compared to a year earlier. Canopy’s chairman attributed the windfall to Canopy’s decision to move early on legal weed that helped it corner a big part of the Canadian market when the drug was legalised for recreational use in 2018.

Despite the positive news, the spreadsheet risk is a shot across the bow for the high growth business. Legal weed might be an exciting, trendy industry – but it’s prone to the very same risks as any other business utilising spreadsheets.

As Patrick O’Beirne of The European Spreadsheet Risks Interest Group (EuSpRIG) said, “People don't actually test their spreadsheets but accept an answer if it looks like what they expect or want.”

Spreadsheet risk is industry agnostic, said O’Beirne. Canopy’s snafu is far from unique, as readers of AccountingWEB will definitely know. Perhaps the most notable example in recent times is Conviviality. Conviviality’s £5.2m “spreadsheet arithmetic error” was a major contributing factor to the business’s sudden collapse. While late last year, an Excel error caused the Japanese government to delay its planned immigration reform bill. 

“Generally, we know that spreadsheets are ubiquitous and their usage is error-prone, so people who don't double check often trip up.”

EuSpRIG’s website has an excellent list of spreadsheet best practices to follow.

Replies (18)

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By Justin Bryant
27th Feb 2019 11:35

Why are these errors never, ever in a company's favour? Mathematically you would expect some errors the other way 50% of the time. Also, why are there no puns about weeding out such errors or the error being a dopey one etc. (the blazing/smoke puns are hardly good ones are they)?

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Replying to Justin Bryant:
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By Dib
27th Feb 2019 13:20

Yes, obviously someone at the company made a hash of it!

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By adam.arca
27th Feb 2019 13:23

And then they had to grass themselves

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Replying to Justin Bryant:
Francois
By Francois Badenhorst
27th Feb 2019 13:58

I wanted to leave some out for you guys to enjoy, too! haha

But yeah, you make a good point about why these things never fall into the companies favour. I suppose when the mistake is 'positive' is just quietly fixed.

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Replying to Francois Badenhorst:
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By Justin Bryant
28th Feb 2019 09:19

Yes indeed. Fixed more likely than not by netting it off with an equal and opposite performance bonus for the incompetents who caused it!

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By Glenn Martin
27th Feb 2019 16:15

Spreadsheet error is new explanation for fiddling your accounts, as it gives the impression its an error made by a low level employee, and not someone at director level instructing someone to increase the stock holding as they have had a poor quarter in the hope the position improves.

The reality is that it doesn't so the provision keeps getting bigger until someone comes clean and blows the whistle on the spreadsheet error

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By Floating Point
28th Feb 2019 10:54

Then the culprit could end up in a cell.

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Replying to Justin Bryant:
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By Ron007
19th May 2019 08:45

Justin Bryant wrote:

Why are these errors never, ever in a company's favour? Mathematically you would expect some errors the other way 50% of the time.

Why, simply because when those positive errors are discovered they are quickly and quietly absorbed as executive management and board "bonuses" for "good management". Cynical, yes. Doesn't make me wrong.

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By JDBENJAMIN
27th Feb 2019 13:40

Their accounting went to pot. Their FD is now saying 'How cannabiso stupid'?

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Replying to JDBENJAMIN:
Francois
By Francois Badenhorst
27th Feb 2019 13:57

Hahaha good one.

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Replying to JDBENJAMIN:
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By Dib
27th Feb 2019 15:42

Have they reffer-ed themselves to their accounting oversight body?

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By Justin Bryant
28th Feb 2019 11:10

That's much more like it and next time they may be able to get a fix with a joint venture.

My own firm goes to town on puns. Check this one out from today:

http://www.cityam.com/273911/myths-circulating-around-impact-no-deal-bre...

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Replying to Justin Bryant:
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By Floating Point
28th Feb 2019 10:55

Spliffing puns

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By RichardLambert
28th Feb 2019 10:25

Oh dear. Well, they're not the first and won't be the last. For the rest of us poor hacks, at least we can try 'FAST' financial modelling principles (Flexible, Appropriate, Structured & Transparent).
This at least is one way of keeping such errors (hopefully) to a minimum!
Either that, or send a ton of cash on consultants to tell us what we should already know ...

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By AndrewV12
28th Feb 2019 10:55

Extract above
“Generally, we know that spreadsheets are ubiquitous and their usage is error-prone, so people who don't double check often trip up.”

Yo wait until they use book keeping software, the posting errors are 10 times as bad, and as for the omissions, duplicates ...Oh my Gosh.

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By AndrewV12
28th Feb 2019 11:01

Under the refiled accounts submitted to the Canadian Securities Administration, the EBITDA loss amounted to CA$155m (£88.5m).

These accounts were prepared a spreadsheet, by who, i would have thought a business that size would at least have Book keeping software and someone competent to use it. Sounds like they were working out of their spare room, possibly a loft with plenty of lighting.

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By Jeaston
01st Mar 2019 15:10

I think there may be a small error in your opening paragraph. You stated that the original loss was "CA$52m (£39.6m)". However the GBP figure should be closer to £29.6m, which make the comparison in the next paragraph make much more sense (i.e. the CAD figure roughly triples while the GBP figure is closer to double!)

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Simon Hurst
By Simon Hurst
02nd Mar 2019 20:39

The ICAEW has also produced a set of ‘20 principles for good spreadsheet practice’ but has tried to keep its existence a closely guarded secret: https://www.icaew.com/technical/technology/excel/twenty-principles

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